How cashflow modelling can boost your confidence, and your financial plan

When you’re working towards your long-term goals, there’s always an element of uncertainty. Life often takes unexpected turns and these events may derail your progress, whether that’s due to illness, the loss of a loved one, or even periods of high inflation.

While impossible to predict, there are ways you can prepare yourself and your finances for events outside of your control. Perhaps one of the more effective tools for doing so is cashflow modelling.

If you’ve read our most recent guide on cashflow modelling, you may already be familiar with how it works and how it might help you answer life’s “what if?” questions.

Essentially, this sophisticated software allows your financial planner to assess your long-term financial situation by inputting vital information, such as your:

• • Earnings
  • Assets
  • Liabilities
  • Ongoing financial commitments.

Then, the model incorporates any external factors, such as investment performance and inflation, to project how these various scenarios could affect your financial position over time.

Continue reading to discover how the practical information you could gain from cashflow modelling may boost your confidence and benefit your financial plan.

1. You could feel reassured that your wealth will provide a suitable retirement income

One of the most significant concerns you might face as you approach retirement is whether your wealth will be enough to support your desired lifestyle.

You may already have an idea of the things you want to achieve in the next phase of your life, which could range from travelling, taking up new hobbies, or simply spending more time with your loved ones.

Whatever your plans, cashflow modelling could allow you to predict how much wealth you’ll need to fulfil them.

Your planner can input your expected retirement income from various sources, such as your private pensions, State Pension, and investments, alongside your estimated expenditure.

The model generated by the software, called the “cashflow model”, will indicate whether your current financial plan is likely to support your goals and, if not, suggest adjustments you can make now.

For instance, if the cashflow model does highlight a shortfall in your retirement savings, this could give you the ideal opportunity to increase pension contributions now to top up your fund.

Alternatively, it could reveal that you’re in a better position that you thought, and may even enable you to consider retiring early.

Knowing that your retirement savings will be sufficient to support the next phase of your life – or even that you’re taking the necessary steps to ensure it does – can help you feel incredibly confident about the future.

2. It might allow you to plan for potential later-life care costs

Another vital consideration to keep in mind for retirement is the potential need for later-life care.

You may find that your retirement spending follows a “bell curve”, where it’s higher in the early years when you’re more active and ticking items from your bucket list, then lower again in the middle years as you start to slow down.

As you enter the twilight years of your retirement, your income needs may increase again, especially if you require later-life care.

If you don’t plan for this possibility, you may risk prematurely depleting your funds, leaving you with a shortfall when you need the money for care.

Care costs can be substantial, too, with Carehome.co.uk revealing that:

• • Residential care costs roughly £1,266 a week for self-funders, translating to £65,832 a year
  • Nursing home care costs £1,529 a week for self-funders, or £79,508 a year.

In the east of England – our local area – the costs are slightly above the national average, with residential care costing £1,304 a week, or £1,599 for nursing home care.

If you own your home or have substantial cash savings, it’s very likely that you would be required to fund all of your own care.

Thankfully, cashflow planning could give you some confidence about dealing with these potential costs.

Since it allows you to see how various scenarios might affect your overall financial plan, cashflow modelling could give you the foresight to set up a dedicated fund to cover these costs.

This reassurance that you have a plan in place for your health in retirement can bring significant peace of mind for both you and your loved ones.

3. Cashflow modelling could help you plan your estate around Inheritance Tax

There’s a good chance you may have already given significant thought to mitigating Inheritance Tax (IHT) before your loved ones inherit your estate.

In the 2025/26 tax year, the nil-rate band – the amount of your estate that can be passed on without incurring IHT – stands at £325,000.

Additionally, if you leave your primary residence to a direct lineal descendant, you can benefit from the residence nil-rate band of £175,000, resulting in a potential tax-free allowance of £500,000.

For couples, you can typically transfer the unused portion of these allowances to one another, allowing you to pass on up to £1 million tax-free.

While this might sound like a significant sum of money, you could be closer to the thresholds than you initially thought, especially after accounting for your home and pensions (which, from 6 April 2027, could start to form part of your estate for IHT purposes).

Read more: Inheritance Tax and pensions: Why you may need to rethink your estate plan

Gifting can be an effective way to reduce the taxable value of your estate, and there are several allowances and exemptions available, as demonstrated by the table below:

While gifting can undoubtedly help reduce your IHT liability, it’s vital to ensure that doing so doesn’t compromise your financial security. If you gift more than you can realistically afford, you may inadvertently compromise your standard of living.

Yet, cashflow modelling could allow you to assess the potential effects of gifting during your lifetime based on your long-term income.

Incorporating these potential gifts into your cashflow model could allow you to determine how much you can afford to give to your friends and family without putting your own future at risk.

Get in touch

As you can see, we could use cashflow modelling to help you secure your financial future and, more importantly, confidence.

Email us at info@harperlees.co.uk or call 01277 350560 to find out more and we’ll be very happy to help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.