In brief
The order in which accounts are drawn down affects how much tax is paid over retirement and how long each account lasts. FutureClear lets you set this order and shows the projected outcome for any sequence.
In plain English
When annual spending exceeds income, the engine draws from investment assets to cover the shortfall. Which account it draws from first — SIPP, ISA, GIA, or another — determines the tax treatment of those withdrawals.
Different accounts are taxed differently on withdrawal. The same total assets drawn in a different sequence can produce meaningfully different after-tax outcomes across a retirement. FutureClear shows the projected result of any ordering set by the user — no single ordering is presented as preferable.
How FutureClear models it
How the engine processes withdrawals
Each year, the simulation:
- Calculates all income (employment, pension, rental, State Pension, and similar)
- Calculates total spending, including any escalated amounts
- Computes the shortfall (spending minus income)
- Works through the withdrawal order, drawing from each asset in sequence until the shortfall is covered
- Applies tax calculations to any taxable withdrawals
- Records resulting balances and tax figures for that year
If assets in the withdrawal order are exhausted before the shortfall is covered, the projection enters a funding gap. This appears as a negative balance or depletion event in the results.
Tax treatment by account type
- ISA: Withdrawals are completely tax-free.
- SIPP in drawdown (flexi-access): Withdrawals are taxable income. Amounts within the Personal Allowance (£12,570 for 2025/26) are effectively untaxed; amounts above the allowance are taxed at the marginal rate.
- SIPP (UFPLS): 25% of each withdrawal is tax-free, 75% is taxable income.
- GIA: Capital gains are subject to CGT; dividends attract dividend tax.
- Premium Bonds / Cash: No tax on winnings or withdrawals.
Simple mode
In simple mode, assets are arranged in a user-defined sequence using drag and drop. The engine draws from the first asset until exhausted, then moves to the second, and so on.
Advanced mode
Advanced mode adds conditions to each withdrawal source, allowing the engine to draw from multiple accounts within defined limits in the same year.
Common configurations:
- Draw from SIPP up to the personal allowance, then switch to ISA for any remaining shortfall.
- Draw from GIA up to the CGT annual allowance each year (realising gains gradually), then draw from ISA.
- Draw SIPP within the basic rate band only, then switch to ISA when the higher rate band would be reached.
All conditions default to off. Each is enabled and configured individually.
Surplus sweep
In years where income exceeds spending — before retirement, or when State Pension starts — there is a surplus. Without surplus sweep configured, unspent income is not allocated anywhere in the projection.
Surplus sweep models what happens if that annual surplus is directed into a chosen wrapper. The engine does not make this transfer automatically in the model — it shows what would happen to projections if the surplus were consistently swept each year.
Available sweep targets:
- ISA: Tax-free growth, subject to the £20,000 annual allowance per person. Surplus above the ISA allowance goes to the configured fallback wrapper.
- SIPP: Contributions receive pension tax relief, but funds are locked until pension access age. Annual allowance limits apply (up to £60,000 or earnings, whichever is lower).
- GIA: No contribution limits or restrictions, but gains and dividends are taxable.
- Cash: No growth assumptions or tax treatment; no limits.
Each year with surplus sweep enabled:
- The engine calculates total income for the year
- It subtracts all spending events
- If there is a positive remainder, the surplus is allocated to the chosen wrapper
- The swept amount is then subject to that wrapper's growth rate, fees, and tax treatment
- ISA annual allowance limits are respected — overflow goes to the configured fallback
Worked example
Suppose income is £28,000 and spending is £24,000. The annual surplus is £4,000.
With surplus sweep targeting the ISA:
- £4,000 is swept into the ISA (within the £20,000 annual allowance).
- In subsequent years, the ISA balance is higher and grows tax-free.
- Withdrawals from that ISA in later years are tax-free.
Now suppose the same scenario is run with surplus sweep targeting a GIA instead:
- £4,000 is swept into the GIA.
- Growth and dividends within the GIA attract tax each year.
- Withdrawals may trigger CGT on any gains realised.
The two scenarios will diverge over many years as the different tax treatment compounds. These are illustrative figures under stated assumptions — not a prediction or a recommendation to use one wrapper over another.
Assumptions and limitations
- Withdrawal order is applied before tax calculations. This means the engine selects the source first, then computes the resulting tax — it does not dynamically minimise tax across sources unless advanced conditions are configured to do so.
- In couple mode, withdrawal order applies across both partners' assets. Split methods are configurable but the engine does not automatically determine which partner's accounts are drawn from in which order without configuration.
- Surplus sweep applies the same wrapper each year. It does not account for years where the chosen wrapper's allowance is already partially used by contributions from other sources.
- The model assumes surplus sweep transfers happen consistently every year where a surplus exists. In practice, the user would need to make these transfers manually.