I feel very fortunate because the prospect of running "pension pot" figures through financial modelling software, and feeling confident enough about the results to be able to make firm decisions based on them, is daunting. Especially when you remember that sticking to the "safe side" and over-funding might very well leave you with a surplus that has cost you precious years of freedom, only to remain unspent because you died before the last row on your spreadsheet.
However, despite the fact that I don't need to use this kind of tool "in anger" I was interested to see how the modelling worked so I took a look at Firecalc which is one of the calculators widely recommended for the job. What surprised me most of all is that there doesn't seem to be a UK version so the figures you enter have all to be converted to $s. Also all the data that the calculations are based on is taken from the American markets. However it maybe just that my Google searches just didn't turn up the right results. I was looking for a direct UK equivalent to Firecalc but it is quite likely that a similar type of "Monte Carlo" simulating process is used by many of the other calculators on the market. More investigation needed.
Firecalc works by running your living costs, portfolio value and life expectancy through a series of calculations and gives you a % likelihood of "success" which has been assessed based on how the markets have performed in the past.
"FIRECalc shows you the results of every starting point, since 1871. You can get a sense of just how safe or risky your retirement plan is, based on how it would have withstood every market condition we have ever faced."
I ran my figures through it and this is the result: