Surplus Lump Sum Inflows
When lump cash inflows occur, the funds will be deposited into the owner's default cash account if they are not spent or deposited elsewhere – e.g. into a savings account, an investment or a money purchase.
Lump sum cash inflows include:
- Tax free cash from money purchases,
- Lump sum payments from final salary schemes,
- Proceeds from liquidated properties/assets (items entered on the Property/Assets screen),
- Future windfalls (entered on the Windfalls screen),
- Surplus debt credits (from a new loan),
- Lump sum pay-outs from protection policies,
- Estate distributions at mortality,
- Lump sum pay-outs from pensions (money purchases, drawdown pensions) to survivors.
If these funds are proceeds from the liquidation of a jointly owned asset (e.g. a couple sells their home), the funds will be split between the owners and deposited into their respective default cash accounts, unless they are spent or deposited elsewhere.
Sweeps - Set surplus cash to be swept from default cash accounts into savings, investments, or money purchases
Suppose you want to assume all surplus income is invested rather than kept in a cash account or that your client tops up ISAs with any leftover surplus. Aside from planned savings, you can also set a sweeps rule for default cash accounts.
The software has a facility for setting the annual sweep of surplus cash from the earner's/owner's default cash account (e.g. Simon's Cash) into to one or more target accounts. Sweeps can be set for these default cash accounts on the Savings screen's Annually Sweep Balance to Other accounts panel.
To set up a sweeps rule for a default cash account:
1. Go to the Cash Sweep Account under Savings and Investments in the Dashboard screen
2. Select Sweep Options
3. Select an account to annually sweep surplus to for the whole of the plan (where there is surplus)
4. Click Done
Sweeps are not percentage based. The entire balance of the default cash account will be swept into the specified target account at the end of the planning year. The only exceptions would be ISAs and money purchases, since both have contribution limits. If an ISA were set as the target account for sweeps, only up to the maximum allowable annual contribution could be swept into the ISA. If a savings account or unwrapped investment were listed after the ISA in the sweeps list, that account would receive the remainder of the funds when swept. Conversely, if a savings account or unwrapped investment were placed at the top of the list of sweeps accounts, that account would invariably receive one hundred percent of the swept funds since neither have rules imposing contribution limits.
Related Topics
Is surplus income assumed spent or saved?