Knowing the value of your pensions and investments is useful, but it does not tell you whether you can afford to stop working, take another holiday or help your children buy a home.

Those decisions depend on how your money may support you over many years, including future spending and financial commitments that have yet to arise.

Cashflow modelling brings these questions into your financial plan. By considering your income, assets, expenditure and debts together, it can help you explore whether your resources could support the life you want and how different decisions might affect your future.

The results are projections based on assumptions, not promises about what will happen.

What is cashflow modelling?

A cashflow model illustrates how your finances could develop over your lifetime.

It can take account of:

• earnings;
• State Pension entitlement;
• workplace and personal pensions;
• investments and savings;
• property or other income;
• outstanding borrowing;
• everyday expenditure; and
• significant planned expenses.

Your adviser will then make assumptions about factors such as future investment returns, inflation, tax and how long your plan may need to last.

Bringing these elements together can help identify when you may need to draw on capital, where a potential shortfall could arise and what effect a change of plan might have.

The starting point should be the life you have in mind.

A retirement that includes regular travel, financial support for family and a move to a new home will require a different spending plan from one centred on remaining close to home.

Cashflow modelling becomes more useful when it reflects these details rather than relying on a single rounded income figure.

How much might your retirement lifestyle cost?

The 2026 Retirement Living Standards published by Pensions UK provide a useful reference point.

The estimated annual expenditure for a one-person household is:

• £13,900 for a Minimum lifestyle;
• £32,700 for a Moderate lifestyle; and
• £45,400 for a Comfortable lifestyle.

For a two-person household, the corresponding figures are:

• £22,500 for a Minimum lifestyle;
• £45,400 for a Moderate lifestyle; and
• £62,700 for a Comfortable lifestyle.

These figures are spending benchmarks, not guaranteed income targets. They also exclude housing costs, so rent, remaining mortgage payments and your own plans need to be added where relevant.

Tax may also mean that you require more gross income than the amount you want available to spend.

Your expenditure is unlikely to follow a perfectly straight line throughout retirement. You might spend more on travel and hobbies during the earlier years, clear a mortgage later or need to allow for care and support costs in later life.

Reflecting these changes can create a more realistic picture than assuming every year of retirement will look the same.

Could you stop working sooner?

Cashflow modelling can compare different retirement dates or explore the effect of gradually reducing your working hours.

An illustrative comparison might consider:

• stopping work at age 60;
• continuing to work until age 65; or
• moving to a three-day working week.

Each option will affect both the income available to you and the length of time your pensions, investments and savings may need to support your spending.

Retiring before State Pension age may create a period during which your other assets need to meet more of your expenditure. A cashflow model can illustrate how this gap might be funded and whether doing so could leave sufficient resources for later life.

The model should also reflect when your individual pensions and other assets are expected to become accessible.

Sometimes the comparison may indicate that saving more or retiring later would be prudent. It may also suggest that you have more flexibility than you thought, particularly if caution has led you to assume that you must continue working without first testing the figures.

Could you afford to enjoy more of your money?

After years of saving, spending capital can feel uncomfortable, even when you have accumulated substantial assets.

Cashflow modelling can help you explore the possible effect of:

• taking an additional holiday;
• making improvements to your home;
• buying a new car; or
• increasing your regular spending budget.

It cannot remove investment risk or guarantee that additional spending will always remain affordable. It can, however, make the potential trade-offs clearer and illustrate what adjustments might be required if circumstances change.

This can be more informative than making decisions based solely on the balance shown on a pension or investment statement.

How much could you give to your family?

Helping children or grandchildren raises a different concern: whether money given away today could be needed later.

Owning an asset does not necessarily mean its full value is available to give away without affecting your future financial security.

An adviser could compare the potential effect of:

• making no gift;
• giving an illustrative £25,000 now; or
• spreading financial support over several years.

Cashflow modelling can explore how each option might affect your future spending capacity, while allowing for other commitments and possible later-life costs.

The tax and legal consequences of making a gift need to be considered separately as part of the wider advice process.

The same approach can be used when considering whether to repay a mortgage, move home or change your working pattern. Rather than treating each decision in isolation, cashflow modelling can show how it interacts with the rest of your finances.

What happens if circumstances change?

A cashflow model is not a one-off prediction. It is a planning tool that should be reviewed and updated as your circumstances develop.

Changes to your income, spending, family situation, health or investment performance could all affect the outcome. Tax rules, inflation and economic conditions may also change over time.

Regular reviews allow the assumptions and figures to be updated, helping the model remain relevant to the decisions you are considering.

Turning the figures into a useful conversation

Good financial planning begins with understanding what matters to you and then assessing whether your resources could support it.

Cashflow modelling can help that conversation by illustrating the possible consequences of different choices in a form that is easier to understand, discuss and revisit.

If you would like to explore how your pensions, investments and savings could support your retirement plans, please get in touch with Alexandra’s Financial Management.

In the second article in this series, How resilient is your retirement plan when life changes?, we consider inflation, market falls, longevity and why a cashflow model needs to be reviewed regularly.

This article is for general information only and does not constitute financial advice.

Cashflow modelling relies on assumptions and projections that are not guaranteed. Actual investment returns, inflation, tax, expenditure and personal circumstances may differ from those assumed.

The value of investments and any income from them can fall as well as rise, and you may get back less than you invested.

Tax treatment depends on individual circumstances and may be subject to change.

Sources and further information

Information checked on 7 October 2026. Figures relate to the 2026/27 tax year where stated. The examples are illustrative and do not constitute individual advice.

Financial Conduct Authority: Undertaking cashflow modelling to demonstrate suitability of retirement-related advice
https://www.fca.org.uk/firms/undertaking-cashflow-modelling-demonstrate-suitability-retirement-related-advice

Pensions UK: Retirement Living Standards 2026
https://retirementlivingstandards.org.uk/news/2026-rls-update