About the Planned Withdrawals screen and how to schedule withdrawals

Voyant normally takes withdrawals as needed from liquid assets whenever your client’s future incomes fail to completely meet their annual expenditures. Whenever there is an income gap, assets are drawn upon automatically. The order in which assets are selected for top-up withdrawals is based on a default Liquidation Order, which is set in the software’s Plan Preferences.

Since the software will attempt to cover future expenses automatically, you don’t have to specify payment sources for future expenses or even schedule future withdrawals from accounts. Voyant will handle this for you, which is enormous timesaver, allowing you to focus on presenting your advice rather than getting bogged down in minutiae of charting out future cash flow.

However, if you want to take a more hands-on approach to setting your clients’ future income strategy, the new Planned Withdrawals screen is a powerful tool to help you do so. Planned withdrawals can be used to illustrate the tax efficiencies of certain drawdown strategies, especially in retirement.

No longer will you need to select individual accounts on the Pensions, Investments or Savings screens, and then drill down into the advanced settings to schedule withdrawals. Withdrawals are now managed from one easy to access screen called “Planned Withdrawals”, which you will find as a new option in the software’s navigation.

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Think of the Planned Withdrawals screen as your withdrawals overview. On it you can add, view and manage all your client’s planned withdrawals. 

Any withdrawals you have set up in the past will be transferred seamlessly from the Investments, Savings, and Pensions screens over to the new Planned Withdrawals screen where they can be viewed and managed in one convenient location.

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How to Schedule Withdrawals Step-by-Step

To schedule withdrawals from one or more accounts, open the Planned Withdrawals screen.

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1. Name: Enter an appropriately descriptive name for the planned withdrawal.

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Note – Planned withdrawals, bearing the names you choose for them, are now shown in the software’s General Overview but are omitted from the overview’s printable report.  

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2. Available Accounts: This field shows a list of all the liquid assets (present and future) available in the plan.

Depending on your entries, accounts could include present or future pensions, investments, savings and other cash accounts. Default cash accounts (e.g. John’s Cash), which are created automatically by the software to hold unallocated cash inflows, are intentionally omitted from this list.  The pensions in this list might include present or future money purchases and drawdown pensions (in our UK release), ARFs/AMRFs (in our Ireland release), and retirement savings plans (in our Canadian and US releases).

3. Select a source account for future withdrawals from the list of Available Accounts and click the right arrow button to move it into the field of Selected Accounts to the right.

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You can select and move any number of accounts from the left field to the right if you intend to set up withdrawals that are to be taken from multiple accounts. When moved, accounts will be added to the list of Selected Accounts in descending order.

Please Note - If you intend to set up a specific liquidation order using the “Total” withdrawal option (more about this in a moment), then be sure to move accounts over in the order desired – i.e. move the first account that is to be liquidated first, and so forth. There is no option to move accounts up or down in the list of Selected Accounts. Accounts can only be removed from the list and added again.

If you need to remove an account from the Selected Accounts, select it and use the left arrow button to move it back into the list of Available Accounts.

 

4. Scheduled Withdrawal Type: Specify the annual amount that is to be withdrawn from the account. The following options will vary based on the type of account.

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All Available = Will in most cases withdraw the entire balance from the selected account(s) in a single year, provided the account selected is not a product with rules that limit withdrawals or preserve a minimum balance. ARFs/AMRFs in Ireland, for example, have rules that ringfence minimum balances in certain circumstances, which might prevent the total balance from being withdrawn.

All Available could be used to schedule the future liquidation of an account. Select on the Planned Withdrawals the account and the event at which the account is to be liquidated.

You could also go to the account itself and apply a Withdrawal Limit of “Scheduled Only”. This means the account would remain ringfenced and cannot be tapped for as needed income, until it is liquidated, as per instructions on the Planned Withdrawals screen.

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Note – Setting a liquidation limit of “Do not allow” and then scheduling a future transfer of 100% of the account balance is another, perhaps better method for scheduling the liquidation of an asset. Transferring funds out of the maturing account and into savings or another investment will preserve the balance, whereas withdrawals scheduled from the Planned Withdrawals screen will usually be assumed spent, if not scheduled to be saved or transferred.

 

% of Account Value = Withdraws the percentage specified from the overall balance of the account.

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Fixed w/ Inflation = Withdraw a fixed annual amount escalated annually by the inflation rate. The inflation rate is set is in the software’s Plan Preferences.

Fixed w/o Inflation = Withdraw a fixed annual amount with no inflation.

If you make an entry in either of the fixed withdrawal fields, both will be populated. This is a convenient feature that allows you to easily toggle indexing with inflation on or off for future withdrawals.

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There are two options for fixed withdrawals scheduled from multiple accounts, Total and Each.

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Total = An option for fixed withdrawals, which becomes relevant only when multiple accounts are selected. When Total is selected, the specified withdrawal amount will be taken annually from the first account in Selected Accounts list until that account is depleted. The software will then move on to take withdrawals from the next account in the list and so forth.

The Total option could be used to effectively set an account-by-account liquidation schedule. For example, if your clients have numerous pensions and they would prefer for a certain pension to be liquidated first, before moving on to the next, simply enter a Total annual planned withdrawal amount. Then select the pensions that will be he sources of these future withdrawals. Select them in the order in which they will be liquidated. The first pension in the list of Selected Accounts to the right will be the first to be liquidated, after which the software will move to the second account in the list and so on.

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Understand that the software’s Liquidation Order will still govern how the software takes any additional funds whenever incomes and planned withdrawals do not fully cover planned expenditures.

Each = An option for fixed withdrawals, which becomes relevant only when multiple accounts are selected. When Each is selected, the amount specified will be withdrawn simultaneously from each of the accounts in Selected Accounts list.

For example, rather than taking income from a single pension before moving on to the next, which is how the software’s default liquidation order would work, a couple could schedule withdrawals of £12,500 from his pension and hers. Doing so might be more tax efficient as it would utilise each person’s annual allowance. The Each option allows both withdrawals to be managed in one convenient entry on the Planned Withdrawals screen.

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Dividend Income = Withdraws only dividend income paid annually to an account. Dividends are an option for Investments. If a Dividend Yield is set for an Investment under Advanced Settings > Growth & Yield in the Dividend Yield field.

Granted, it might be just as easy to untick the “Reinvest Yield” option on this panel, which would also result in the yield being paid out annually to your client rather than being reinvested. But unticking this setting would result in the annual payout of both dividend and interest yields, whereas scheduling a withdrawal of dividend income will only withdraw dividends.

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Max w/o Penalty = Withdraws the maximum available without a tax penalty for certain products. This option is intended primarily for use in setting tax deferred withdrawals from bonds (life funds) in our UK release.

Please Note - This option is not designed to calculate withdrawals up to the client’s personal allowance. If you select this option for an account type that has no rules regarding withdrawal allowances, the result will be the liquidation of the entire account.

When this option is selected for a bond (life fund) in our UK release, the tax deferred allowance of 5% per annum of original principal will be withdrawn annually. Planned withdrawals from the bond will cease once the original principal is fully withdrawn.  

Please Note - If your client hasn’t withdrawn their tax deferred allowance (e.g. the bond was purchased in 2012 but no withdrawals have been taken to date) the total available tax deferred allowance to date will be withdrawn in the first planned withdrawal. The software will then adjust subsequent withdrawals down to the regular 5% of original principal original principal until the original principal is fully withdrawn.  

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Pension Withdrawal Strategy (UK money purchases only)

Two options are available to set how incomes will be taken from money purchases in our UK release. These are UFPLS and Flexible Access Drawdown and they determine whether an element of taxable income will be included in each withdrawal or if withdrawals are to be taken entirely from the pension owner’s tax-free cash allowance.

Flexible Access Drawdown (FAD) = Allows scheduled withdrawals from money purchases to be taken from the client’s tax-free cash allowance first. The total withdrawal amount specified will be tax free. With each amount withdrawn tax free, an additional 75% is crystallised and moved into a linked drawdown account, which he software creates automatically.

Please Note – The Flexible Access Drawdown option can only work if the amount you are withdrawing is less than the pension’s overall tax-free cash allowance, which is normally 25% of the pension’s balance. For example, if you were to schedule a withdrawal of 50% or 100% of a pension’s total balance, the software will withdraw this amount. It will not limit withdrawals to only the tax-free allowance since the amount scheduled clearly exceeds it. Your client will receive a combination of taxable and tax-free cash, effectively an UFPLS withdrawal, even if you have the Flexible Access Withdrawal selected as the withdrawal strategy.

UFPLS = The software’s default for as needed withdrawals taken from money purchases. Withdraws a mix of taxable and tax-free monies.

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5. People: Simply disregard the People panel. There is no need to assign an owner to a planned withdrawal. The People panel is a standard feature on all the data entry screens in Voyant Adviser, which is why you will find it on the Planned Withdrawals page. The software already has ownership details for the available accounts.

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6. Time (Event and Stages): Withdrawals can now be easily set to begin and end for discreet time periods on the Time panel.

The events and stages available on this panel are set on the Time screen or you can add events as needed from the Planned Withdrawals screen. More about this in a moment.

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To schedule the start of withdrawals, go to the Time panel, select the panel’s Events tab, and click an event. A green dot will appear next to the selected event indicating that this is when the planned withdrawals will begin.

To end recurring withdrawals, select a second event, an end event. A red dot will appear next to selected event indicating that this is when scheduled withdrawals will end.

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Withdrawals will recur for the duration set on this panel, provided the selected accounts are not fully liquidated before the end of the selected timespan.

To schedule a one-off withdrawal, simply leave the single start event (green dot) selected. There is no need to select an end event. A single selected event indicates a one-off withdrawal.

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Note – There is no need to leave the Planned Withdrawals screen if you need to add a new event to the timeline to schedule the beginning or end of withdrawals. Simply click the New Event button at the bottom of the Time panel’s Events tab. Events can be added based on year or the selected event owner’s future age.

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Recurring withdrawals could also be scheduled using stages. On the panel’s Stages tab, select one or more stages in the timeline. The software will assume that withdrawals begin at the start of the first select stage and end at the end of the last selected stage. If you select only one stage, withdrawals will begin and end with the start and end of the selected stage.

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Stepping Future Withdrawals Up or Down

Planned withdrawals can be stepped up or down (increased or decreased) if changes need to occur within timespan over which the withdrawals are scheduled. The overall timing of planned withdrawals is set on the Time panel.

 

The Basic Rules of Stepping

There are a few basic rules about steps to bear in mind when stepping planned withdrawals or anything else in your client cases.  

- Steps are always scheduled using events on the planning timeline. Events can be added to the timeline whenever a step is needed.

- Steps can only be scheduled in the years between the planned withdrawal’s start event (green dot) and end event (red dot), as set on the Time panel. You cannot step a planned withdrawal in the year that it is scheduled to begin or end. Steps can only occur in the years between.

- The initial amount entered for the planned withdrawal sets the total first-year withdrawal. The year in which the withdrawals are to begin is set by the start event (green dot) on the Time panel.

- Withdrawals will stop (provided the accounts are not depleted beforehand) in the year set by the end event (red dot) on the Time panel. There is no need to step withdrawals down to zero to end them.

- You cannot step a withdrawal multiple times in a single year – one step per year maximum.

- Only a recurring withdrawal could be stepped. There is no concept of stepping a one-off withdrawal.

 

How to Schedule a Future Step in Planned Withdrawals

With these basic rules in mind, to schedule a future step in planned withdrawals:

1. On the Planned Withdrawals screen expand Advanced Settings and select Step Up / Step Down.

2. Select the event at which the step/change in in withdrawals is to occur.

3. Select and enter details of what the planned withdrawal will be from that point onward.

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Note – The Fixed w/ Inflation withdrawal option indexes future withdrawals with inflation. The withdrawal amount you enter will be an inflated one if withdrawals begin in the future. The same goes for steps. The future stepped amount you enter will be an inflated amount when the future withdrawals are increased or decreased.  

When you add a step, an additional set of fields will appear automatically on the Step Up / Step Down panel. These are available if you need to add additional steps. Simply disregard these fields if you don’t. Scroll down and click the OK button to save the step.

There is no need to leave the Planned Withdrawals screen if you need to add a new event to the timeline to schedule a future step in withdrawals. Simply click the New Event button at the bottom of the Time panel’s Events tab. Events can be added based on year or the selected event owner’s future age.

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Please Note - If you add an event on the fly via the Time panel, you may need to collapse and expand again the Planned Withdrawals screen’s Step Up / Step Down panel. Doing so will give the software the opportunity to refresh this panel’s list of available events.

 

Related Topics

New in Our December 2018 Release - The Planned Withdrawals Screen

Scheduling planned withdrawals from pensions

Surplus Withdrawals - What happens to the surplus if I withdraw more than my client needs?

Withdrawal Limits – Placing restrictions on the software’s ability to liquidate assets as needed

Crystallisation Instructions for Money Purchases (UK)

Withdrawal Limits on Money Purchases and Drawdown Pensions