London, 24 May 2018. From today, people no longer need a crystal ball to see their financial future: with the “Time Machine” from Scalable Capital, they can now systematically plan for their retirement.
The tool provides answers to the questions of how much money you should save for retirement, whether your current savings plan is sufficient for your desired standard of living in old age and what the real value of your assets will be at the beginning of your retirement, after inflation. This means investors can finally make a meaningful estimate of the monthly income they can expect in retirement. The “Time Machine” is freely available on the Scalable Capital website.
"For most people, private retirement provision is a mystery. Many do not know how much money they will need to set aside for their retirement. Others ask us whether their current savings plan is sufficient to secure their standard of living in old age. Our Time Machine provides answers to all these questions. We want to encourage people, in a playful way, to plan responsibly for their retirement and set the right course for their future," says Simon Miller, Co-Founder and UK CEO of Scalable Capital.
Scalable Capital uses the same assumptions for calculating payments during retirement and their possible fluctuation margins as it does for its existing investment planner. In addition, the Time Machine takes into account not only the current age, life expectancy, statutory retirement age and individual risk tolerance of interested private investors, but also the effect of inflation. These parameters can also be changed by the user to assess the sensitivity of different investment assumptions on the resulting scenarios.
A Wide Range of Applications for the Time Machine
While a complex algorithm with a huge amount of data is behind the tool, the experience for the investor is simple: They only need to indicate their age, sex, initial investment amount and monthly savings plan. With just one click, they can see a graphic showing what monthly income can be expected in old age if they want to use the entirety of their savings over the course of their retirement. A future version of the tool will include options for the investor to set aside part of the assets for inheritance.
The user can view future payments not only nominally but also in real terms. This gives a realistic assessment of the actual purchasing power of their income in retirement. After all, few people can estimate what effect an inflation rate of two percent will have on purchasing power over a period of 30 years, for example. Scalable Capital also uses a sensitivity analysis to make it transparent how monthly payments could be affected by particularly good and particularly bad capital market scenarios.
The tool can also be used to find out how much you need to contribute every month, given a specified initial investment, in order to achieve a desired monthly income in retirement.. Alternatively, If the user provides fixed details of their monthly savings plan and their desired income in retirement, they can see what the initial investment required to achieve this would be.
In order for the Time Machine to reflect future performance as realistically as possible, it is important for users to understand: Risk is the currency which investors use to buy return in the capital markets. The result therefore varies depending on the risk category. Depending on age, Scalable Capital recommends a risk category to each user. However, unlike after the suitability test for registration to the service - a legal requirement for all discretionary investment managers - the user can adjust the risk category both downwards and upwards in the Time Machine in order to better assess the impact of risk on the potential return.
Basis of Calculations:
Scalable Capital uses the same assumptions for calculating future returns and risks as for the existing investment planner. In addition, the Time Machine takes inflation rates into account as they reduce the real net return (see: https://uk.scalable.capital/app/api/pdf/static?type=scalable_cones_explanation)
2. Life Expectancy:
Life expectancy is preset to the statistical life expectancy of a person living in the United Kingdom. It takes into account both the year of birth and the gender. The year of birth is calculated from today's age.
Source: Eurostat 2018
3. Retirement Age:
The retirement age is preset to the (standard) retirement age specified by law in the United Kingdom, i.e. a logic dependent on gender and year of birth.
4. Rate of Inflation:
Inflation is set to (constant) 2% p.a. by default. This corresponds to the long-term target value of the European Central Bank (ECB), the Bank of England (BOE), the Swiss National Bank (SNB) and the US Federal Reserve.
5. Tax on Investment Income:
The constant default tax rate is 0.0%. If the user decides to apply a different tax rate then the total return generated annually is reduced accordingly. Any statutory or personal allowances or accumulated losses are not taken into account.
6. Contributions and Withdrawals:
Any regulations regarding annual limits are not taken into account.
About Scalable Capital:
Scalable Capital was founded in 2014 and is active in the United Kingdom, Germany, Switzerland and Austria. With assets under management of over £600 million and more than 20,000 clients, Scalable Capital is one of the leading digital investment managers in Europe. The UK founder team consists of Adam French, Simon Miller and Dr Ella Rabener. Its unique risk management technology was developed in close collaboration with Professor Stefan Mittnik, PhD, Director of the Chair of Financial Econometrics and Director of the Center for Quantitative Risk Analysis at the Ludwig Maximilian University in Munich.
Since its launch in Germany in February 2016 and in the UK in July 2016, it has established a leading proposition with strong demand not just from private investors, but also from financial institutions and corporates. Through its successful partnership with Germany’s third-largest retail bank, ING-DiBa, it attracts hundreds of new clients each week. Scalable Capital also partnered with BlackRock in the UK and Siemens Private Finance in Germany to promote its wealth management service to the companies’ respective employees.
Scalable Capital currently employs a team of almost 80, many of them experts in financial econometrics and machine learning as well as software engineering. Scalable Capital creates and manages globally diversified ETF portfolios for its clients to help them achieve their long-term financial goals, supported by a proprietary risk management technology. It aims to make investment management cheaper, better and more accessible.
Scalable Capital Limited is regulated by the Financial Conduct Authority (FCA) in the United Kingdom, while Scalable Capital Vermögensverwaltung GmbH is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany.
For more information, please visit - www.scalable.capital
Phone: +44 (0)203 750 0703