UFPLS approach to retirement

Skinnydad

Good evening.  I have noticed in a number of threads that there are plenty of advice re Pension drawdown and on the web there is plenty of advice on pension drawdown calculators.  Does anyone know if there are anything similar that extrapolates funds to show you how long a fund may last if you go down the UFPLS route.  I want to take 15K a year from a 250K pot which is invested in a VLS60% fund. I have exhausted my Tax relief from other incomes. are there calculators out there to assist in this.  I realise that the fund may vary in performance etc.  I'm just looking at present for ball park figures. Thanks in advance..

LHW99

I made up a spreadsheet in Excel, where I can play with inflation rate and growth rate. It won't be exactly accurate, but gives me some "all gone in 10 years" versus "will keep you going to 110" scenarios!

tacpot12

UFPLS vs. Flexi-drawdown won't change how long the pot will last. 

It will make a difference whether you want £15K before tax or after tax, and whether you want/need the £15K to increase with time, so keep pace with inflation. 

Assuming its £15K after tax, and rising as say 2.5% per annum, £250K would last about 22 years, but in reality the sequence of returns is probably going to reduce this a bit. 18 years would be more certain. 

Secret2ndAccount

Yes, there are calculators out there. I made my own, so I can't recommend one I'm afraid. The threads you want to read on this forum are about SWR or 'Safe Withdrawal Rates'. There have been about 1,000 of them, but we are no closer to agreement on what a safe withdrawal rate is.
15k is too much to take out of a 250k pot if you need it to last. Could be gone in 10 yrs or 20 yrs depending on the stock market, but unlikely to make it to 30 yrs.  If you have other provision to keep the lights on, or you just need to bridge the gap until other pensions kick in, then it could be a plan.

dunstonh

As mentioned, your draw rate is unsustainable.  For example, here is what happened if you started with £250k on the 1st Jan 2000:

You have run out by 2016.

You don't know if you are going to have a good period or a weak one but as we have just had a really good period for over decade and with all the things going on that are going on, you should be planning for a much weaker rate of return.   

3.5% is around the mark. About £8750 a year.  If you are in your 50s then less than that.

Audaxer

Skinnydad said:

I want to take 15K a year from a 250K pot which is invested in a VLS60% fund. 

As that amounts to a 6% withdrawal rate, it doesn't look to be sustainable for a long retirement.

pensionpawn

dunstonh said:

As mentioned, your draw rate is unsustainable.  For example, here is what happened if you started with £250k on the 1st Jan 2000:

You have run out by 2016.

You don't know if you are going to have a good period or a weak one but as we have just had a really good period for over decade and with all the things going on that are going on, you should be planning for a much weaker rate of return.   

3.5% is around the mark. About £8750 a year.  If you are in your 50s then less than that.

Just some observations. Why does the pot have to last instead of reducing to zero at average life expectancy? For those who have qualified for a full state pension that will cover 2/3's of the annual drawdown after 10-12 years and there's the impact of paying in £3600 gross, £2880 net until 75. Horses for courses....

dunstonh

Just some observations. Why does the pot have to last instead of reducing to zero at average life expectancy?

It doesn't have to.  You choose your objective and take an appropriate draw rate and keep monitoring and adjusting as time goes on.

Although if you are happy to do that, then an annuity may well be the better option.

 For those who have qualified for a full state pension that will cover 2/3's of the annual drawdown after 10-12 years and there's the impact of paying in £3600 gross, £2880 net until 75. Horses for courses....

That was not the scenario mentioned by the OP.

Kim1965

What exactly does the op need the sipp to do? Is it the only pension provisions, sp, db pensions? Is it to fund a specific gap? 

pensionpawn

dunstonh said:

Just some observations. Why does the pot have to last instead of reducing to zero at average life expectancy?

It doesn't have to.  You choose your objective and take an appropriate draw rate and keep monitoring and adjusting as time goes on.

Although if you are happy to do that, then an annuity may well be the better option.

 For those who have qualified for a full state pension that will cover 2/3's of the annual drawdown after 10-12 years and there's the impact of paying in £3600 gross, £2880 net until 75. Horses for courses....

That was not the scenario mentioned by the OP.

True, doesn't preclude it though.

older_and_no_wiser

I think one should always factor in that your annual withdrawal will naturally decrease as you get into your 80s (for those luckily enough to have a long life span). As you get older, there is more likelihood of ill health. Do you want to use your remaining money to fund care home fees (if required) or simply use the equity from selling up your home? Personally, I'd love to have completely used up my retirement pot by this time if it came to that.

Hopefully you have a full state pension coming in to fund the later years. 

Is leaving an inheritance for family etc important? If so, could you do this during your life so that you get the benefit of seeing your loved ones enjoy the money?

Travel and holidays will probably decrease as you enter the latter years too.

I'm at an age now (50s) where I can see the above actually happening to the generation above me. My own father's financial behaviour now he's in his late 80s is teaching me so much about what potentially my attitude to money and lifestyle could be in 30+ years time 

Quite a lot to take into account and sometimes spreadsheets and calculators won't take these things into account.

The accumulation phase is certainly a lot easier than the withdrawal phase!