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What is the UK safe withdrawal rate?

Posted By The Accumulator On In Investing,Passive investing | 32 Comments

Search “What is the UK safe withdrawal rate?” and the results are disappointing. Google’s AI response offers 4%, which as we’ll see is just plain wrong. Meanwhile it’s hard to get a straight answer from the humans amid all the financial content marketing.

Indeed there’s plenty of sketchy chat about the 4% rule [1]. It’s a much-misunderstood figure – predicated on US numbers that aren’t reflective of the data from most other developed world countries, including the UK.

This matters, especially considering that some US financial experts believe the 4% rule may be too high even for Americans.

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.

Not safe! I need to mention that the so-called ‘safe withdrawal rate’ 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 ‘sustainable withdrawal rate’. It’s the same metric, minus the misleading advertising.

Okay, before we get to the UK’s SWR number, let’s recap what the safe withdrawal rate actually is and does.

What is the safe withdrawal rate?

Figuring out a safe withdrawal rate is useful for:

The SWR itself represents the maximum percentage of your portfolio you can withdraw as income in the first year of retirement.

For example, a 4% SWR suggests a £500,000 portfolio can sustainably support a £20,000 annual income.

After year one, you discard the SWR and simply multiply your established income by annual inflation to calculate the next year’s income. Hence you effectively live off the same real-terms income every year. So £20,000 in this example. 

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. 

How is the safe withdrawal rate calculated?

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.

Torturing the data reveals:

Got that?

For example, the famous 4% rule was originally formulated by financial planner William Bengen.

Bengen discovered a US retiree should choose 4% as the maximum safe withdrawal rate (known as MSWR or SAFEMAX).

The small print 

Bengen’s 4% number was – and is – conditioned on:

From that cluster bomb of caveats we can deduce that:

I’m not trying to put you off using an SWR here. Far from it.

The safe withdrawal rate lies at the heart of my own retirement planning [3].

But the 4% rule dominates this conversation like a big orange cheeto, so I want to lay out why that number can’t be taken at face value. 

As far as I’m concerned, the starting point for British residents should be the UK’s safe withdrawal rate, not America’s.

The rest of this article will hopefully show you why. 

Safe withdrawal rate UK

Traditionally, SWR studies calibrate on 30-year retirements, sustained by annually rebalanced equity/bond portfolios.

So we’ll start there and aim to improve our withdrawal rate, by applying some reasonable tweaks, later in this series. 

Here’s the chart of UK SWRs from 1870 up to the last 30-year retirement cohort, the class of 1995:

A chart showing the UK safe withdrawal rate, 1870 to 2024, for equity/bond portfolios and a 30-year retirement. [4]

Data from JST Macrohistory [5]1 [6], FTSE Russell [7], A Millennium of Macroeconomic Data for the UK [8] and ONS [9]. March 2025.

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 1870.2 [10]

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’s end on New Year’s Eve 1899.

The best year was 1975 for most portfolios.3 [11] The class of ’75 could have larged it up with a 15.9% SWR on a 100% stock portfolio. (But note: that’s not as amazing as it sounds because UK equities crashed 73% [12] between 1972-74. So by 1975 the retirees had 100% of a lot less portfolio than they had in 1972.)

The worst times for Brits to begin their golden years were 1910 and 1937 (depending on your asset allocation). 

Safety first

1910 and 1937 are the SAFEMAX years. Their numbers give us the highest SWR that would have sustained the portfolio for the given length of retirement, across all historical scenarios.

The best SAFEMAX UK safe withdrawal rate is 3.1% for 30-year retirements. 

In other words, our version of the 4% rule in the UK is the 3.1% rule.

Everything’s bigger in America!

And you only drum up the 3.1% SWR using a 100% equities portfolio, too.4 [13] The more bonds you add, the worse things get.

The 3.1% rule

I really think the 3.1% rule could catch on, you know. But before I get carried away with the trademarking, let’s find out how much it squeezes your income relative to the 4% rule.

What size portfolio do you need to support £20,000 with a 3.1% SWR?

That’s a sickener. Your starting portfolio needs to be 29% larger with the 3.1% rule versus a 4% SWR.

But hang in there! It will get better, but first, it’s gotta get worse.

Here’s the full safe withdrawal rate UK table including longer retirement periods:

Safe withdrawal rate (%) UK equity/bond portfolios by retirement length 

Years / equities3035404550
40%2.62.321.81.7
50%2.82.52.221.9
60%2.92.62.42.22.1
80%32.82.62.42.3
100%3.12.92.72.52.4

These SWRs delivered a 100% success rate. SWR research typically includes 0% to 20% equity portfolios. But I haven’t because I suspect they matter to few Monevator readers. For similar reasons I’ve excluded shorter retirements. It won’t be hard for me to dial ’em up if anyone wants the info.

Doubtless many Monevator readers will be hoping to stretch out their mortal coil a little longer than 30 years. And the trade-off is clear: Mo years mo money.

Sorry my Gen Z friends.

You’ll also notice the SWR uptick gained from reducing bond exposure (i.e. holding more equities) is quite large.

The 100% equities SWR is fully 35% larger than the 40% equities number for a 40-year retirement.

That’s very different from the optimal US withdrawal rate, which includes a substantial bond allocation.

Wade Pfau calculated [14] that any US equity allocation between 20% and 44% lies within 0.1% of the best SWR for a 40-year period – while I previously found [15] that an 80% global equities allocation was best for 30-year or longer retirements with the Timeline dataset, with 70% being a hair’s breadth behind. 

We’ll look at a broader range of asset allocations in more depth later in the series.

Charging ahead

Finally, we best not forget portfolio charges. The rule of thumb is:

For example, the running costs of our No Cat Food retirement portfolio [16] are around 0.3%. That includes ETF OCFs, platform charges, and dealing fees.

So using that as a guide, we’d have to knock 0.15% from our chosen SWR.

Why Brits shouldn’t use the US 4% safe withdrawal rate

You can buy an S&P 500 ETF [17] and US Treasury bonds [18]. So why can’t we Brits just declare for Team America and supersize our SWR?

Because it doesn’t work. Here’s the SAFEMAX table for portfolios formed on US equities (unhedged, GBP returns) and US Treasuries (GBP hedged).

Safe withdrawal rate (%) UK: US equity/US Treasury portfolios

Years / Equities3035404550
40%2.82.72.52.52.4
50%2.92.82.72.62.6
60%32.92.82.72.7
80%3.132.92.92.8
100%3.23.1332.9

SAFEMAX year is 1969 except for 40/60 portfolios – 35-50yr retirements, SAFEMAX 1965. Additional US data from Aswath Damodaran [19]. March 2025.

Well, these are better withdrawal rates. Sometimes impressively so for longer retirements.

But the thing that’s jumping out at me is the distinct lack of 4 per cents. Or anything like them.

In fact, for the baseline 30-year retirement portfolio, buying American only upgrades us from the 3.1% rule to 3.2%. Disappointing.

The problem is that the UK’s inflation record is considerably worse than the US’s.5 [20] And a safe withdrawal rate is founded on real returns. So while it’s true the S&P 500 has left [21] our equities trailing, British price pressures still knocked the shine off American exceptionalism.

This means you can bedeck your portfolio in the Stars and Stripes, but there’s a risk it’ll be hampered like a Dodge Viper stuck in single-lane traffic on a Devonshire country road.

The bond-gnawing brutality of UK inflation also explains why the best US-orientated GBP portfolio is still 100% equities in contrast to more balanced Stateside recommendations.

Counterintuitively, Blighty’s SWR actually goes up if you bench US Treasuries and bring UK gilts back on.

Yes, there are differences in the maturities counted in the datasets. But a significant factor is also likely to be that British bond investors demand a fatter yield to compensate for bigger UK price shocks. Whereas US bondholders can happily settle for a skinnier inflation premium less suited to British conditions.

Ultimately though, a US equity/bond portfolio suffers from the same fundamental problem that a Union-Jacked one does: inadequate inflation protection.

Albion’s way

This isn’t a problem that’s likely to go away. US CPI increased 13.3% during the recent bout of high inflation from 2021-24. Ours rose by a chunkier 20%.

We have a more open economy than the US. One that’s more vulnerable to importing inflation from abroad.

As we’ll see later in the series, the appropriate response to this is to hold a better mix of assets. 

Portfolio ruin: the danger of overcooking your SWR

Am I being nerdy and pernickity?

Well it wouldn’t be the first time – but just so you know this next chart shows what happens if you apply the 4% rule to a 30-year retirement starting in 1910:

A safe withdrawal rate UK chart showing how quickly the UK safemax portfolio runs out of money using the 4% rule [22]

These retirees went broke inside 17 years. The portfolio loses money in real terms for ten of the first 11 years.

Meanwhile inflation goes through the roof: up 158% from 1915 to 1920.

Every year our retirees scale up their withdrawal to cover inflation, swigging ever larger rations from their dwindling reserves.

Healthy returns arrive during the remaining five years of the portfolio’s shortened life but by then it’s too late. The portfolio has already entered a death spiral as the retirees withdraw 180% more in 1921 than they did in 1910.

There are simply too few assets left for growth to cover outgoings. The money’s gone before Christmas 1926.

Granted, in reality very few people would watch their resources evaporate like this without taking action. Budget cuts would ensue or you’d go back to work, or both.

But the point is that taking too much income from the start risks living later years in bleak austerity. 

How often does the 4% rule fail in the UK?

This next table shows you the percentage of retirement periods (%) that could not sustain a 4% SWR for different UK equity/bond portfolio allocations:

Years / Equities3035404550
40%3645536775
50%2937475463
60%2431414554
80%1721263036
100%1217222427

Those are unacceptable failure rates in my view. And the sheer size of the numbers indicates that the UK’s problem isn’t limited to a few benighted retirements that were ravaged by two World Wars. 

Superficially, the UK’s SAFEMAX years of 1910 and 1937 seem easy to dismiss. I can almost hear the devil on my shoulder saying: “Don’t worry about it. That’s ancient history. Nobody would be stupid enough to start a world war today.”

But I’m much less confident about that than I was. 

I don’t know about you, but I’m feeling pretty twitchy about the prospect of British peacekeepers in Ukraine – operating without adequate American support. Not to mention the prospect of a rising China and the closing of Thucydides Trap [23]. 

But we don’t need to debate the probability of a war between World Powers. Just cast your mind back to the US asset-based portfolios we looked at earlier. There the SAFEMAX years were 1969 and 1965. 

These pasty SWRs were induced by 1970s economic malaise, not by existential conflict. 

UK OK

Alright, that’s enough doom and gloom.

This post has been about making public the kind of data that Americans take for granted.

And because we’re starved of information on the UK safe withdrawal rate, many Brits are told it’s fine to borrow the US one.

In truth though, the 4% rule does not travel well.

But while ours may not be as good as theirs, there’s plenty we can do to beef up a realistic, UK-centric SWR. We’ll explore how to do that in the next part of this series.

Take it steady,

The Accumulator

  1. Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor. 2019. The Rate of Return on Everything, 1870–2015. Quarterly Journal of Economics, 134(3), 1225-1298. [↩ [28]]
  2. We need a full 30 years of data to calculate the maximum safe withdrawal rate, hence no numbers yet for post-1995 retirements. The SWR number for each retirement cohort can only be known in retrospect. [↩ [29]]
  3. The 40/60 portfolio could only muster a relatively measly 10.9% SWR in 1982. [↩ [30]]
  4. For some reason, you’re allowed to assume you could have known the ideal retirement asset allocation in advance, which you couldn’t. This condition is called ‘Perfect foresight’. Not a gift of mine unfortunately. [↩ [31]]
  5. It’s debatable as to how much of the gap is an artefact of different headline inflation methodologies. For instance RPI vs CPI. [↩ [32]]