Preferences - How to set Voyant to assume all surplus habitual income is saved
Voyant is normally set to assume unallocated surplus is spent. You have the option, however, to switch off this setting and assume the opposite. Leftover surplus can be assumed saved, if you think this approach is appropriate for your clients and their lifestyle.
This setting is found on the Preferences screen under Plan Preferences.
To open Preferences, click the cog button in the top left of the screen:
Plan Preferences appear in the right-hand column.
Expand the Calculation Settings panel. Tick the Transfer Excess Income / Credits to Savings box. When this preference is ticked, all unspent, unsaved surplus will be assumed saved.
If you prefer this to be the software’s default assumption going forward, as you create new client cases, make the same change in the adjacent Calculation Settings panel to the left side of the screen, under System Preferences.
Click the Apply button in the bottom right hand corner of the screen to save the change to the Preferences.
What is considered surplus habitual income?
Unlike lump sum inflows, which are always assumed saved, habitual income, may be assumed spent if not saved, depending on how you set the software to operate.
Habitual income includes:
- Employment income,
- Other income (entered on the Other Income Screen),
- Scheduled withdrawals (on-going or one-off) from investments or savings,
- Drawdown pension income,
- Yield (dividend and interest) from unwrapped investments that is taken as income, not reinvested into the fund,
- Annuity payments,
- Final salary payments,
- State pension benefits,
- Regular payments from long term care or income protection policies.
Voyant is set initially to assume that any leftover surplus from these habitual income sources will be spent on miscellaneous unplanned discretionary expenses unless you schedule contributions to savings, investments, and/or money purchases to capture the surplus. This assumption is popularly known as Parkinson’s Corollary or Parkinson’s Second Law, which suggests that one’s expenditures inevitably rise to meet one’s income.
Although your clients may provide very detailed and seemingly realistic accounts of what they think they spend, there may be all manner of future discretionary expenses they cannot foresee. Assuming future surpluses will be saved may not be a realistic assumption for many clients as doing so may leave them with a large, improbable store of ready cash.
We generally think it safer to assume that surplus is not saved, which encourages you to have an active discussion with your clients about how they might best plan to save or invest these funds. You can then set up a savings and investment plan in their client case, perhaps as a what-if scenario, and demonstrate the advantages of future savings.
Future surplus habitual income that is not scheduled to be spent or saved but that is assumed spent is called unallocated income. You can view how much unallocated surplus is being assumed spent each year on the legend of the Let’s See Cash Flow chart.
Plan Preferences vs. System Preferences
Changes to this setting on the mirror Default Inflation / Growth Rates panel in System Preferences, on the left side of the screen, will be used only going forward, as you create new client cases. System Preferences are used as a template only for new client cases. Changes to System Preferences will not retroactively affect your existing client cases.
If you want to change this preference in any existing client cases, you will need to open and edit them individually, in each case's Plan Preferences.