Methodology

The model simulates every year from your current age to your chosen life-expectancy horizon. Each year, balances grow by the assumed rate, contributions are added while you're still working, and — once retired — income is drawn from your pots to hit your target net (after-tax) income.

Withdrawals follow a tax-efficient waterfall:

1. ISA first — completely tax-free.
2. GIA next — Capital Gains Tax on the gains portion of each withdrawal.
3. SIPP last — taxed as income, topped up by your State Pension once it starts.

Because each pot is taxed differently, the engine solves for the gross withdrawal needed to leave you with the right net income after tax — using a bisection search rather than a hand-coded inverse of the progressive tax bands.

SIPP drawdown and the State Pension are taxed as income against the rest-of-UK bands. Scottish rates are not modelled.

The personal allowance taper is included: for every £2 of income above £100,000, £1 of allowance is lost, reaching zero at £125,140.

A General Investment Account has no tax wrapper, so selling units to fund income can realise a capital gain. Fireworks models this in a simplified form:

• Each withdrawal realises a gain proportional to the pot's embedded gain (value minus cost basis).
• The £3,000 annual exempt amount (2026/27) is applied each year.
• Gains above it are taxed at 18% within the basic-rate band and 24% above it (non-property rates from 30 Oct 2024), stacked on top of your income that year.

Two deliberate simplifications: the starting GIA balance is assumed to carry no embedded gain (so early CGT is understated), and dividend tax is not modelled.

Under Other investments you can add property. There are no mortgages in the model.

• Rental property — its value grows at your chosen rate, and the rental income is taxed as income(stacked with the State Pension and any SIPP drawdown), offsetting your target in retirement. You can optionally sell it at a chosen age: residential CGT (18%/24%) is charged on the gain, the net proceeds move into your GIA, and the rent then stops.
• Home you live in— counts as net worth and grows, but isn't drawn for income unless you downsize. Downsizing at a chosen age releases a share of its value as tax-free cash (private-residence relief) into your GIA. The starting rental value is assumed to carry no embedded gain, same as the GIA.

You can take 25% of your pension tax-free, up to a cap of £268,275 (the Lump Sum Allowance). Fireworks lets you choose how, under Lifestyle scenario → Pension access:

• Gradual (UFPLS) — the default. 25% of every withdrawal is tax-free and the other 75% is taxed as income. This spreads the tax-free allowance and is usually the most efficient.
• Lump sum— take the whole 25% as cash up front. Since it can't fit in an ISA (£20k/yr limit), Fireworks places it in your GIA; the rest of the pension is then fully taxable on drawdown.

The UK Normal Minimum Pension Age is 55 today, rising to 57 on 6 April 2028. Early retirees modelled here reach it after 2028, so the default is 57 — and the SIPP can't be touched before it (bridge years must run on ISA/GIA).

From your State Pension age, a flat annual income is added and offsets your pot withdrawals — the pots only fund the rest of the target, so they last longer once it starts. The default is the full new State Pension for 2026/27, £12,547.60/yr (£241.30/week, +4.8% triple lock) — lower it if your National Insurance record is incomplete.

State Pension age is 66 today, rising to 67 (2026–2028) and 68 (2044–2046). The default is 67, editable in the planner.

The main projection assumes a steady return every year, which hides sequence-of-returns risk — a run of bad early years hurts far more than the same returns later. The Confidence tab instead runs 2,000 randomised market paths and reports the probability your plan survives.

• Annual returns are drawn from a distribution set by your equity/bond allocation (equity ≈ 7% return / 16% volatility, bonds ≈ 2.5% / 6%, interpolated).
• Three withdrawal strategies are compared: flat (spend the target regardless) and guardrails ±5% / ±10%, which trim spending when markets are down and let it recover toward the target when they're up — flexibility that typically lifts the success rate substantially.
• Simplifications: the invested pots are modelled as one combined portfolio, guaranteed income is treated as net, and pot withdrawals carry a single effective tax rate taken from your deterministic plan. It's a confidence estimate, not a guarantee.

You are Coast FIRE if your current pots, with no further contributions, would still grow enough to fund your target income for life. The planner's Coast mode reports:

• Coast number — the minimum invested today (no contributions) that sustains the plan, found by bisection on the same drawdown engine.
• Surplus / gap — how far your current pots are above or below that number.
• Coast age— the earliest age you could stop contributing and still coast, found by re-running the plan from the balances you'd have reached by each age.

• Pots grow at a flat nominal growth rate per poteach year. Your target income is quoted in today's money and grown by an inflation rate(default 2.5%), so later withdrawals rise; the planner's Today's £ / Future £ toggle switches the projection between the two. The State Pension rises with the same inflation rate (its triple-lock behaviour), while income-tax bands are held at 2026/27 levels, so fiscal drag is captured. The Confidence tab adds randomness (see below).
• Rest-of-UK tax bands only — Scottish rates aren't modelled.
• GIA CGT is simplified (no embedded starting gain; no dividend tax).
• Contributions stop at your retirement age. Optional part-time (Barista FIRE) income can be added — taxable earnings from retirement until an age you choose, offsetting your target so the pots draw down less early on.
• Onboarding asks three things: your annual spending target, your ages, and how you plan to get there (retire fully, coast, or go part-time first). Spending targets use the UK PLSA Retirement Living Standards 2025(single, excluding housing): Minimum £13,400, Moderate £31,700, Comfortable £43,900 — or your own figure, and all editable afterwards. There is no separate “Lean / Fat FIRE” question: those differ only by the spending target you set here.
• 2026/27 tax figures throughout (income tax and CGT thresholds are frozen; State Pension uses the confirmed +4.8% triple-lock rise).
• Single-person plan; no partner or joint modelling.
• All figures are estimates in today's terms and will diverge from reality — treat them as a way to compare scenarios, not predict outcomes.