Lesson 13 of 25 · 7 min

Carrying an unused amount forward

An amount blocked this year is not banked; it is queued, and it has to pass the same test again on arrival.

An amount blocked by a ceiling is not always lost. In many systems it joins a queue, and the queue is tested again in the next period on exactly the same terms.

The mechanism has three moving parts. An amount is carried into the following period. It is added to that period's interest. The combined figure is then tested against that period's ceiling, and whatever exceeds the ceiling carries forward again. Nothing is banked and nothing is promised: a carry-forward is a claim that has to win the same contest a second time, against a ceiling nobody knows the size of yet.

Four years make the shape visible. Interest of $52,000 against $31,000 of matching income leaves $21,000 to carry. The next year brings $54,600 of interest and only $26,400 of income, so $49,200 is queued. The third year brings $88,500 of income against $49,800 of interest plus the $49,200 queue, and the ceiling finally binds from the other direction: $88,500 of the $99,000 available is used and $10,500 carries on. The fourth year adds $46,200 of interest to $19,700 of income, and the queue grows again to $37,000.

Across the four years $202,600 of interest was paid and $165,600 met income, leaving $37,000 still queued. That queued amount is not a loss and it is not an asset. It is a contingency whose value depends entirely on income that has not arisen yet, in periods governed by rules that may not be these rules.

Systems differ materially here. Some carry forward indefinitely, some for a fixed number of periods, some not at all, and some extinguish a queue on events that have nothing to do with the loan. The above is the shape of a rule, not a conclusion about anyone's return, and which version applies is a question for an adviser.

Key terms

Carry-forward: An amount blocked in one period and added to the next period's total, where it faces the same test again.
Queue: The accumulated stock of carried amounts. It can grow for years and is only drawn down when a period's ceiling exceeds that period's own cost.
Contingency: A claim whose value depends on something that has not happened. A queue is worth nothing until matching income arrives to absorb it.

Worked example

Four years of queueing

Interest and matching income across four consecutive periods, with anything blocked carried into the next.

Year 1: $52,000 of interest, $31,000 of income: Queue $21,000
Year 2: $54,600 plus the $21,000 queue, $26,400 of income: Queue $49,200
Year 3: $49,800 plus the $49,200 queue, $88,500 of income: Queue $10,500
Year 4: $46,200 plus the $10,500 queue, $19,700 of income: Queue $37,000
Interest paid across the four years: $202,600
Interest that met income: $165,600

Four years of paying interest left $37,000 waiting on income that has not arisen. The queue is a contingency, not a balance.

Check yourself

Over four years, interest of $52,000, $54,600, $49,800 and $46,200 meets matching income of $31,000, $26,400, $88,500 and $19,700, with blocked amounts carried forward. How much is still queued at the end?

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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.