Mortgage on a SIPP

jamesd

SonOf wrote: »

But not many buy those. And a drawdown case that wanted to leave room for RPI increases would have a lower drawdown rate.

The 4% rule includes uncapped inflation increases every year in its standard rate. The Guyton-Klinger rules usually increase with inflation but skip it and add extra increases or decreases based on actual times lived through. If you're going to compare then you need to either use inflation-linked annuities or increase the SWR by your expected inflation rate. RPI isn't strictly comparable because recent UK SWR work is likely to have used CPI so a cut would be needed. But the annuity might also have a cap on annual increases to consider.

SonOf wrote: »

Actuaries generally believe that 3% in your 50s and 3.5% in your 60s is a sustainable rate.

Assuming that's with uncapped inflation increases and after costs those don't look unreasonable. A bit lower than historic basis but that's expected from another way of doing it.

SonOf wrote: »

I recently got over 5% on an annuity case for someone aged 63. A few ailments but nothing critical. (no GARs, level basis as other income that would increase annually).

And making the typical BoE 2% inflation target assumption I'd expect you to compare to:
1. 4% rule at 5.2% but level, no inflation increases, assuming 1.5% total fund, platform and ongoing advice cost
2. Guyton-Klinger 7% variable, same costs
3. Keeping some money in cash and using that for state pension deferral at 5.8% plus inflation.

SonOf wrote: »

I am certainly not suggesting an annuity is the right thing. Just pointing out that annuity rates can actually be in the ballpark or higher than a safe sustainable drawdown rate.

They can be but if you have written what you wrote here about inflation and SWRs vs annuities you have some client work that needs review.

Inflation increases are so fundamental to the SWR research that you might want to read at least some of the papers linked from [URL="https://forums.moneysavingexpert.com/discussion/5466114safe withdrawal rates[/URL], particularly post 4.

SonOf

They can be but if you have written what you wrote here about inflation and SWRs vs annuities you have some client work that needs review.

You tend to find that many on this board understate risk and use historic figures which may not be the same for the future. Plus, the average UK consumer generally takes lower investment risk and that has lower investment returns.

One should not fail to recognise the regulatory risk. The first things, in the event of a complaint, that the FOS will say if you have recommended anything higher than the actuarial rates as a "safe rate" is that a) there is no such thing as a safe rate and b) when you said safe rate, why did you go above what is considered a sustainable rate.

That doesn't mean you don't go above those rates but, personally, if we do, we add extra warnings with increasing severity the more it is over. Even if I think personally, it won't be an issue.