In electrical power transmission and distribution networks power transformers represent a crucial group of assets both in terms of reliability and investments. In order to safeguard the required quality at acceptable costs, decisions must be based on a reliable forecast of future behaviour. The aim of the present study is to develop an integral transformer lifetime model which involves degradation mechanisms for most relevant subsystems, applicable to individual power transformers and transformer populations. In this paper, we present a predictive model for power transformer reliability which involves three essential ingredients: failure statistics, physical understanding of the degradation process, and actual knowledge of the present condition. The model is based on evaluation of existing literature and past experience on degradation mechanisms, failure modes and diagnostic techniques. The model is illustrated for integral reliability of three transformer failure modes, related to the degradation of the transformer winding insulation, of bushings and of tap-changers.