S<\/span>earch \u201cWhat is the UK safe withdrawal rate?\u201d<\/em> and the results are disappointing. Google\u2019s AI response offers 4%, which as we\u2019ll see is just plain wrong. Meanwhile it\u2019s hard to get a straight answer from the humans amid all the financial content marketing.<\/p>\n Indeed there\u2019s plenty of sketchy chat about the 4% rule<\/a>. It\u2019s a much-misunderstood figure \u2013 predicated on US numbers that aren\u2019t reflective of the data from most other developed world countries, including the UK.<\/p>\n This matters, especially considering that some US financial experts believe the 4% rule may be too high even for Americans.<\/p>\n Investigating the UK safe withdrawal rate (SWR) provides useful counter-evidence, a sober corrective, and a uniquely British perspective on not running out of money in retirement.<\/p>\n Not safe!<\/strong> I need to mention that the so-called \u2018safe withdrawal rate\u2019 is a complete misnomer. Applying the SWR rules naively does not guarantee safely completing your retirement with money still in the bank. A SWR number is just a rule-of-thumb. It may not be enough to keep your portfolio off the retirement rocks. For that reason, some prefer the term \u2018sustainable withdrawal rate\u2019. It\u2019s the same metric, minus the misleading advertising.<\/p>\n Okay, before we get to the UK\u2019s SWR number, let\u2019s recap what the safe withdrawal rate actually is and does.<\/p>\n Figuring out a safe withdrawal rate is useful for:<\/p>\n The SWR itself represents the maximum percentage of your portfolio you can withdraw as income in the first year of retirement.<\/p>\n For example, a 4% SWR suggests a \u00a3500,000 portfolio can sustainably support a \u00a320,000 annual income.<\/p>\n After year one, you discard the SWR and simply multiply your established income by annual inflation to calculate the next year\u2019s income. Hence you effectively live off the same real-terms income<\/strong> every year. So \u00a320,000 in this example.\u00a0<\/p>\n The crucial thing is your initial withdrawal rate should be set low enough (based on historical precedent) that you can draw a stable real-terms income for the rest of your life, barring catastrophe.\u00a0<\/p>\n The devil is in this detail! The safe withdrawal rate for the UK or any other country is derived from backtests of asset class real returns.<\/p>\n Torturing the data reveals:<\/p>\n Got that?<\/p>\n For example, the famous 4% rule was originally formulated by financial planner William Bengen.<\/p>\n Bengen discovered a US retiree should choose 4% as the maximum safe withdrawal rate (known as MSWR or SAFEMAX).<\/p>\n Bengen\u2019s 4% number was \u2013 and is \u2013 conditioned on:<\/p>\n From that cluster bomb of caveats we can deduce that:<\/p>\n I\u2019m not trying to put you off using an SWR here. Far from it.<\/p>\n The safe withdrawal rate lies at the heart of my own retirement planning<\/a>.<\/p>\n But the 4% rule dominates this conversation like a big orange cheeto, so I want to lay out why that number can\u2019t be taken at face value.\u00a0<\/p>\n As far as I\u2019m concerned, the starting point for British residents should be the UK\u2019s safe withdrawal rate, not America\u2019s.<\/p>\n The rest of this article will hopefully show you why.\u00a0<\/p>\n Traditionally, SWR studies calibrate on 30-year retirements, sustained by annually rebalanced equity\/bond portfolios.<\/p>\n So we\u2019ll start there and aim to improve our withdrawal rate, by applying some reasonable tweaks, later in this series.\u00a0<\/p>\n Here\u2019s the chart of UK SWRs from 1870 up to the last 30-year retirement cohort, the class of 1995:<\/p>\n Data from JST Macrohistory<\/a>, FTSE Russell<\/a>, A Millennium of Macroeconomic Data for the UK<\/a> and ONS<\/a>. March 2025.<\/p>\n Each datapoint shows the maximum SWR that a retiree could employ to enjoy 30-years of inflation-adjusted fixed income withdrawals, for a retirement that began in any year from 1870.<\/p>\n For example, the graph shows us that someone retiring in 1870 could initially withdraw 7.5% from their 60\/40 portfolio without emptying it before the 30-year retirement\u2019s end on New Year\u2019s Eve 1899.<\/p>\n The best year was 1975 for most portfolios. The class of \u201975 could have larged it up with a 15.9% SWR on a 100% stock portfolio. (But note: that\u2019s not as amazing as it sounds because UK equities crashed 73%<\/a> between 1972-74. So by 1975 the retirees had 100% of a lot less portfolio than they had in 1972.)<\/p>\n The worst times for Brits to begin their golden years were 1910 and 1937 (depending on your asset allocation).\u00a0<\/p>\n 1910 and 1937 are the SAFEMAX years. Their numbers give us the highest SWR<\/strong> that would have sustained the portfolio for the given length of retirement, across all historical scenarios<\/strong>.<\/p>\n The best SAFEMAX UK safe withdrawal rate is 3.1% for 30-year retirements.\u00a0<\/p>\n In other words, our version of the 4% rule in the UK is the 3.1% rule<\/strong>.<\/p>\n Everything\u2019s bigger in America!<\/p>\n And you only drum up the 3.1% SWR using a 100% equities portfolio, too. The more bonds you add, the worse things get.<\/p>\n I really think the 3.1% rule could catch on, you know. But before I get carried away with the trademarking, let\u2019s find out how much it squeezes your income relative to the 4% rule.<\/p>\n What size portfolio do you need to support \u00a320,000 with a 3.1% SWR?<\/p>\n That\u2019s a sickener. Your starting portfolio needs to be 29% larger with the 3.1% rule versus a 4% SWR.<\/p>\n But hang in there! It will get better, but first, it\u2019s gotta get worse.<\/p>\n Here\u2019s the full safe withdrawal rate UK table including longer retirement periods:<\/p>\nWhat is the safe withdrawal rate?<\/h2>\n
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How is the safe withdrawal rate calculated?<\/h2>\n
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The small print\u00a0<\/h3>\n
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Safe withdrawal rate UK<\/h2>\n
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<\/a><\/figure>\nSafety first<\/h4>\n
The 3.1% rule<\/h3>\n
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Safe withdrawal rate (%) UK equity\/bond portfolios by retirement length\u00a0<\/h3>\n
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