Planit:Consolidated Process for Country Production
From Planipedia
The Process
This document consolidates the various steps to create and/or upgrade a country in PlanPlus Planit for production use. The evolution of the tool for a country is an iterative process, much like financial planning itself. Country production is never ‘finished’ as the information in the underlying assumptions of Planit will be subject to change. From income tax brackets, to the addition of new account types to development upgrades to the foundations of Planit, some updates will be performed regularly and others only when they are required. Either way, updates are inevitable.
A key aspect is the degree of "automation" and the granularity of the analysis at different phases. As we work with educators or professionals in a new jurisdiction, additional functionality or analysis may be refined. It is important to understand that in the initial stages, the vast majority of information necessary to "localize" for a country may be table driven, while more advanced requirements may need actual enhancements to the software.
Phase One: PlanPlus Planit Activation of a Country
Many of the fundamentals of financial planning are consistent from country to country - the basic time value of money does not change. There are two fundamental requirements that PlanPlus must implement before activating a country.
1. A set of representative benchmark indices used for the asset allocation classes. These are used to derive rate of return and investment income distributions for the investment portfolio of a client in a particular country.
2. The graduated tax tables that are applied to income.
PlanPlus has undertaken to set up these two basic criteria for many countries (over 50 at the current time). Individual countries will each have their own institutions and web pages to provide the sought after information.
Usually the asset allocation historical indices have been sourced from various government sites or other Internet locations. They will include:
- a domestic cash index (ie 90 Days Treasury Bills or a government floating interest rate)
- a domestic fixed income index (either a Fixed Deposit Rate, 5 years or longer, or preferably a longer term bond yield index)
- a global fixed income index using a currency adjusted global government bond index
- a domestic equity market index
- possibly a domestic small cap index is one exists with sufficient history
- possibly a regional equity index for the region the country is in, localized for currency.
- a global equity index localized for currency
- possibly an emerging market index, localized for currency
We also need and source from government sites a historical inflation index and a currency conversion rate to US$.
For income taxes, two sources that are particularly helpful to conducting research on any tax issues, and may reveal other country-specific information, are:
- KPMG – Taxation of International Executives
- Pricewaterhouse Coopers – Worldwide Tax Summaries
We usually look to these sources to set up the initial graduated tax tables.
Planit – Country Specific Items
With the initial two components in place, the Country Specific Items can be accessed under the Table Administration section of any PlanPlus Planit, and provides instant admittance to many of the country-specific planning assumptions. The first step is to "Unsuppress" the country so that it is visible for access.
Each of the different sections within the Country Specific Items deals with a different component or element of localizing financial planning. These sections will be reviewed individually, starting with the “Edit” link.
1.1 Country Specific Item: Edit
The first few editable fields on this screen document the format of certain identification and contact information for a country (ie Government ID, postal code, phone numbers). Where a country has a defined and consistent format a mask of letters (represented by A’s) and numbers (represented by 9’s) can be created. This ensures data entered in to the matching fields in the software fits the format and PlanPlus Planit will be able to check that the data input by advisers is in the correct format. If no fixed format exists these can be left open.
The Currency Code drop-down list will allow the administrator to select the default currency for residents of this country to measure the value of assets, revenues, objectives, taxes et cetera. There are over 50 currencies in the table. To add a new Currency that does not yet appear on the list a PlanPlus technician must add it to the table with the appropriate ISO codes.
Suppressing a country will essentially turn the country “off” in PlanPlus Planit so that clients cannot be added within that planning jurisdiction. If clients, accounts or users are already using this country jurisdiction, the country cannot be suppressed. “Un-suppressing” a country with this check-box will turn it on for further use and testing.
The “Age for University Start” fields tells PlanPlus Planit when to default calculating for any educational expenses expected for a dependent.
The Planning Defaults section of this screen contains the various default values used by PlanPlus Planit in pre-populating certain data entry screens and calculators. If the generic numbers are not appropriate for a country, you will simple edit the amounts in this screen and click “Save” at the bottom once you have completed the changes.
At the bottom of the Country Edit screen is a button "Create Default Products". This must be pressed when a country is activated but after the default currency has been confirmed to set up default products (Personal Use, Business etc) in the system.
1.2 Country Specific Items: Account Types
A key issue in most jurisdictions are the regulatory types into which assets can be categorized. These types usually have tax ramifications in respect to how they are treated when you make contributions to the account, how they are taxed when they accumulate and how they are taxed when they are withdrawn.
From a specific country the administrator can access the Account Types screen to displays the major accounts that are available in a country so they can be properly represented and treated in PlanPlus Planit.
As a standard for most countries, PlanPlus Planit includes an Insurance Policy, Personal Use, Business/Other and Investments. Investments are taxed as they accumulate and are subject to a capital gain when they are sold. The individual tax treatment for interest income, dividends on an account, and capital gains are determined in the tax tables.
Additional account types can be added where they exist for Tax-Protected Retirement Investments, Education Investments and so on. Usually contributions to retirement accounts are tax deductible when made, accumulate tax free, and are fully taxed when used or withdrawn in retirement. As we work with planners in different countries more detail and localization can take place.
Here you can edit or delete existing account types, select the “Order” in which the account types appear in the Assets and Liabilities drop-down list, and “Rank” in what order their funds should be used in the Life Goals calculations.
If you Edit or Add a new account type, you will see a screen similar to the one below.
The process of documenting an account for a country includes multiple steps:
- Enter a “Description”
- Check whether it appears as a default account for a newly created client.
- What is the typical ownership (individual or joint)
- What regulatory types can be held within this account type
The “Use of Funds” drop-down list is one of the most important aspects of defining the parameters of an account, since the option chosen defines how Planit treats the account capital.
- Use as required – any amount of funds can be withdrawn at any time there is a need to fund lifestyle or life goals.
- Use as required after retirement – same as above, except that no funds can be withdrawn from the account before the client meets his/her retirement age (target or model depending on the scenario)
- Liquidate at retirement – withdraws all the funds at retirement and shits them into general investments
- Use as required to age then annuitize - allows the system to withdraw money as required until a particular age, then annuitize or evenly deplete funds over the balance of the lifetime.
- Annuitize at retirement/goal date – Evenly depletes the funds from age of retirement
- Use as required subject to minimum RRIF – This is a Canada specific algorithm for mandatory minimum withdrawals of retirement accounts.
- UK Personal Pension Payout – is unique to the UK with 25% received tax free on retirement and the balance annuitized over the life of the client and fully taxable.
As the number of users in a jurisdiction increases, PlanPlus will look at unique calculations for withdrawal schemes.
1.2.1 Regulatory Type Administration
A country may have defined it's own set of Regulatory Type configurations for tax purposes and configuration that can impact feature visibility on the Assets & Liabilities asset edit page. This administration screen is a separate menu item under Table Administration called "Regulatory Types". Countries that are visible in the drop list selection depend on the planning jurisdictions enabled for the logged in user on their profile. There is a "Generic" type that lists regulatory types for all countries that do not have a defined set (most countries) of which access to is controlled via a separate security ID since it has such a global impact on the system.
On the listing you will see the regulatory types for that country. Selecting edit presents options to further customize the treatment of the investment vehicle particularly on the Goal calculators (Retirement, Education & Other) as well as various options that can appear when editing an asset underneath an account of this type.
Some of the select options apply to the account level while others to the asset level:
- Account Level
- Client Name - registration type only available when creating an account that is not off book. This can also enable a list of Plan administrators for selection as well.
- Nominee - registration type only available when creating an account that is not off book
- In Trust For - Identifies an in trust for ownership. Also enabled the income beneficiary section
- Joint TIC - Joint Tenants in Common, can be selected to set multiple account owners.
- Joint WROS - Joint With Right of Survivorship owner type option, can be selected to set multiple account owners.
- Joint QC Non-Spousal - another Joint ownership type
- Income Beneficiary - allows for the income beneficiary section to appear when adding or editing an account
- Asset Level
- Asset allocation - enables editing or viewing of a linked products asset allocation (edit if a custom asset)
- Loan information - enables the loan/liability fields box when editing an asset. Also enables entry of summary level liability information on an account on the Assets & Liabilities edit screen
- Loss of key person - allows for entry and setup of the loss of key man insurance. Typically used on Business/Other types only.
- Disposition strategy - enables the disposition strategy feature when editing an asset. Typically used on Business/Other and Personal Use types only. Used to create future revenue streams for showing a sale of an asset (business, house, etc).
- Stock Option - enables the stock option box for entering and creating future revenue streams from stock option payouts
1.3 Country Specific Items: Provinces, States and Territories
This screen is relatively simple in that it catalogus the names of the recognized geopolitical regions of a country, and their corresponding region codes. The main screen summarizes the completed entries. If you choose to add or edit a region, you will see something similar to the screen shot below. The most important fields are the three-letter “Province Code” and the full name of the region under “Description”.
1.4 Country Specific Items: Education
The Education page will display the tuition and living costs for post-secondary education institutions in a country. The main screen summarizes what you have entered and the Edit or Add screen allows you to change and input new costs for a related institution.
When entering a new educational institution, you must enter the name, the associated costs, and the currency the costs are measured in.
1.5 Country Specific Items: Estate Rates
Where the Integrated Financial Plan is used, the Estate Rates table will be used to calculate the estate tax generated on first and second death. Estate taxes can be quite complex with specific rules in a jurisdiction regarding gifting and thresholds. This may require programming changes.
1.6 PlanPlus Planit – Currency Exchange Rates
The Currency Exchange Rates can be accessed under the Table Administration section of any PlanPlus Planit, and is used to document the exchange rate of various national currencies with 1 USD.
Note: a country must be ‘un-suppressed’ in the Country Specific Items screen before its corresponding currency can be updated in the Currency Exchange Rates, as the currency exchange is only relevant to countries that are actively being used in production. Note: you cannot add currencies here that do not yet exist in the PlanPlus Planit currencies list. To add a new currency, a request must be sent to PlanPlus to specially upload the new currency name and code.
To update the exchange rate, merely click the checkbox to the left of the currency to be edited, and click Edit.
The Value and As of columns will have data entry fields where you can type in the amount of USD that can be bought with one unit of the listed currency.
Phase 2: Refining the Models
When we start working with planners there are a number of areas that may be refined in the model to improve accuracy and ease of use.
- Labels – localize generic titles, headings and text to be country-specific
- Provincial/State Taxes – income tax brackets and deductions at the province or state level
- Special Tax Considerations – specially coded tax programs, deviating from the generic format. This might be things like exceptional treatment to domestic dividends or capital gains tax, that cannot be handled in the tables.
- Specific Regulatory Types – specific account types with differentiating properties not covered by the system.
- Government Benefits – automatic inclusion of standard government pensions given certain parameters. Initially users can enter government benefits manually under the Pensions screen. For many countries we have built these into tables for automatic inclusion.
- Morningstar Data – import market performance and properties of products for the new universe
Research
For some of the components listed above, you will need to seek out background information – in the form of data or theoretical explanations – to properly consider new countries being added to Planit and changes to outdated parameters. Research is also the most important step in terms of understanding the planning issues of the country, and to capture this information as closely as possible within Planit.
Translating to a New Language
There are several components that must be translated in order to implement PlanPlus Planit in a new language. To find out more visit Admin:Translating PlanPlus Planit
