USS calculator/safe withdrawal rate

thegentleway

USS has new benefit calculator which I was playing with. I put in retiring at 57 and only claiming DC part. It says I can flexi draw down £32.5k pa from £500k pot until I’m 99... I.e. a 6.5% withdrawal rate which seems rather optimistic.

I was actually looking to use DC pot to bridge to 68 when DB kicks in + SP. It reckoned I could draw down £60k until I’m 68, i.e. 12%, which is fine is sequence of returns is favourable but would run out of money otherwise. Short of doing Monte Carlo simulation, are there some conservative withdrawal rates I can use?

QrizB

thegentleway said:

USS has new benefit calculator which I was playing with. I put in retiring at 57 and only claiming DC part. It says I can flexi draw down £32.5k pa from £500k pot until I’m 99... I.e. a 6.5% withdrawal rate which seems rather optimistic.

Might it have been including your State Pension in the calculation?

thegentleway said:

I was actually looking to use DC pot to bridge to 68 when DB kicks in + SP. It reckoned I could draw down £60k until I’m 68 ... are there some conservative withdrawal rates I can use?

What do you get if you use your  £500k to build an 11 year index linked gilt ladder?
https://lategenxer.streamlit.app/Gilt_Ladder

OldScientist

thegentleway said:

USS has new benefit calculator which I was playing with. I put in retiring at 57 and only claiming DC part. It says I can flexi draw down £32.5k pa from £500k pot until I’m 99... I.e. a 6.5% withdrawal rate which seems rather optimistic.

I was actually looking to use DC pot to bridge to 68 when DB kicks in + SP. It reckoned I could draw down £60k until I’m 68, i.e. 12%, which is fine is sequence of returns is favourable but would run out of money otherwise. Short of doing Monte Carlo simulation, are there some conservative withdrawal rates I can use?

The amount of £32.5k is, presumably, nominal and not index-linked. However, a quick calculation in a spreadsheet with rate(42,32.5,-500,0,1) indicates they have used an average nominal return of about 6.4% which is not completely ludicrous, but a lot higher than the historical worst cases.

For the shorter period (where using an average return of about 6.4% gives about £60k nominal annual income over an 11 year period), drawdown from a portfolio can be simulated using https://www.2020financial.co.uk/pension-drawdown-calculator/ . A few quick runs indicate the 'safe' withdrawal rate (i.e., index linked) varied from 6.8% with a 60% equities, 40% cash portfolio, to 6.9% with an all cash portfolio (i.e., not much difference with asset allocation).

I note that you'd have to move the DC part of your pension from USS if you wanted to build an inflation linked gilt collapsing ladder (although this would provide more certainty at around £47k per year index-linked).

ussdave

Having just had a quick play with this it appears to be reverse commuting some of the IB pot for additional RB benefits.  I can't see a way to stop it doing this (though again, only a quick scan).

Worth checking in case that impacts any of your considerations OP.

d6fs1l

ussdave said:

 I can't see a way to stop it doing this (though again, only a quick scan).

If you opt to take DB/DC together, you can force the modeller not to touch the DC pot in step 3 in "Take less DC savings".

I think, however, the OP is modelling taking only the DC pot (in which case the issue you describe does not arise).