Worried the Budget will rattle your pension? Here’s what twenty years of market panics actually did

The Autumn Budget lands on Wednesday 28 October, delivered by John Healey, the Chancellor Andy Burnham appointed in July. And the run-up has been jumpy.

The interest rate the government pays to borrow for 30 years rose above six per cent for the first time since 1998. That rate is called the gilt yield, and gilts are simply loans to the government. When the yield goes up, the value of the gilts people already own goes down, and plenty of pension funds hold gilts.

The sell-off has also shrunk the Chancellor’s financial cushion, which is why everyone is braced for tax rises.

If you’re retired and your pension is still invested, you’ve probably looked at your statement recently and felt a knot in your stomach. I get it. When you’re no longer earning, every wobble feels personal. So I want to show you what the last twenty years of market frights actually looked like, warts and all.

Twenty years, five big scares

Let’s start simple. Imagine someone who began putting £25 a month into a global index fund in October 2006. That’s a fund that buys a small slice of hundreds of big companies around the world, so you’re never betting on just one.

A year later, the banking system nearly collapsed. By the end of 2008, they’d paid in £675, and it was worth about £580. Then came the eurozone debt crisis in 2011. Then Covid, when the pot dropped by around £1,400 in three months, almost five years’ worth of their £25 payments, gone on paper in one go. Then 2022, the year of soaring inflation, rising interest rates and the mini-Budget chaos that sent the gilt market into meltdown. Then the tariff scare of spring 2025.
Five proper frights. And yet the £6,000 they paid in would now be worth roughly £23,800.

But you’re taking money out, not putting it in

Here’s where I want to be straight with you, because that example flatters the situation for retirees. When you’re saving, a crash helps you: your monthly payment buys shares on the cheap. When you’re drawing an income, a crash works the other way. Every pound you take out while prices are down means selling more of your investments to get it.

So let’s look at a retiree instead. Say someone retired in October 2006 with £100,000 in a global index fund and took £4,000 a year out, paid monthly.

By February 2009, after the financial crisis, that pot had fallen to about £67,800. Imagine opening that statement. A third of your retirement savings gone in under three years, and you’re still taking income out of it.

Now here’s the bit I’d ask you to sit with. If that retiree held their nerve and carried on as before, the pot would be worth roughly £427,500 today, and that’s after taking out £80,000 in income along the way.

If instead they panicked in February 2009, sold everything, and waited a year until things “felt safe” before reinvesting, they’d have about £230,600 today. Nearly £200,000 less, from one decision made on the worst day to make it.

I do need to flag that this example is deliberately simple. Most retirement pots hold a mix of shares, gilts and cash, so the drops are usually smaller and the long-term growth is usually smaller too. The withdrawals don’t rise with inflation, and the figures ignore fees. But the lesson holds: in my view, the damage in a crash mostly comes from selling at the bottom, not from the crash itself.

What I’d think about before 28 October

Don’t make big, irreversible decisions on rumours. Every autumn, Budget gossip about pension tax-free cash sends people rushing to withdraw money they don’t need, and once it’s out you can’t put it back the same way. Wait for what’s actually announced.

Know how much cash you’re holding. Many retirees keep one to two years of planned withdrawals in cash, so if markets fall they can draw from that instead of selling investments at a low. If you have nothing set aside, that’s worth a conversation, possibly with a financial advisor.
Find out what your pension is invested in. Some funds designed for people near or in retirement hold a lot of gilts, and those have had a bumpy few years. You might be more exposed to the bond market than you realise.

Ask yourself whether you could take a bit less in a bad year. Even a small trim to your withdrawals during a downturn leaves more invested to recover.

The honest tension

Here’s the problem nobody can make go away. The money you need next year shouldn’t be at the mercy of the stock market. But retirement can last 25 or 30 years, and the money you’ll need in your late eighties probably can’t afford to sit in cash for two decades either, losing value to inflation. Getting that balance right is the whole game, and it’s different for everyone. A Budget headline doesn’t change that balance. A panicked decision can.

If you’d like help working out the right mix for your pension, you can speak to one of the independent financial advisers we work with.

This article is for educational purposes only and isn’t personal financial advice. The value of investments can fall as well as rise and you may get back less than you put in. Past performance is not a reliable guide to future returns.

Sources: MSCI World net total return index (USD) via Alphacubator; GBP/USD monthly exchange rates, US Federal Reserve; Investing Insiders calculations; City AM; Reuters; Ukpolitical.info.