How to protect your pension withdrawals during a market downturn

If you are retired or approaching retirement, recent market volatility might be unsettling. It’s never easy to watch your savings fluctuate, especially if you are depending on them to support your retirement years.

The good news? There are practical steps you can take to help protect your retirement income and stay financially resilient in uncertain times. Here are eight options to consider:

 

1. Revisit your retirement goals

Research suggests maintaining your lifestyle after retirement could require 50% to 86% of your previous earnings.[1] However, if much of your spending is non-essential, you might find greater flexibility. Now is a good time to reflect on what truly matters to your well-being. Outline your expected income and expenses, and build a budget that reflects your real priorities.

 

2. Embrace adaptable spending

Instead of withdrawing a set amount from your pension each year, a more flexible strategy could work better. With this approach, known as ‘dynamic spending’, you adjust withdrawals based on how your investments are performing, taking more when markets are strong and scaling back during downturns, within a sensible range. This method can help preserve your pension while still supporting your lifestyle.

 

3. Consider your cash flow options

Instead of taking a monthly income from your investments during market downturns, you could set aside a year’s worth of income in a lower-risk money market fund and draw from that instead. This approach helps you avoid depending on shares and bonds[2] during volatile periods, reducing the risk of crystallising losses. A money market fund serves as a temporary holding place for your savings, aiming to offer a modest return above that of cash, without the higher risks of growth assets.

 

4. Create a more sustainable spending approach

Even for those with significant assets, reviewing discretionary spending can make a meaningful difference over time. Consider cancelling subscriptions or services you no longer use, and review premium memberships or lifestyle expenses that may no longer add value. If you still have any outstanding debt, addressing it now can help preserve your wealth and improve long-term financial flexibility.

 

5. Explore downsizing

If you own your home, moving to a smaller property or a more affordable location can offer dual benefits: freeing up equity to fund your retirement and reducing ongoing expenses. This could make your savings go further.

 

6. Use alternative income sources

The longer you leave your pension untouched, the more time it has to recover from market downturns. Consider whether you have other investments or assets that could generate income. Do you receive rental income or have cash savings? Consider using interest on cash savings as an ‘income’. Are there any items you no longer need that could be sold? Do you still need two cars, or even one?

 

7. Postpone your retirement date

If you are not yet retired but had planned to be soon, you could consider delaying your retirement. While not an easy decision, working longer gives your investments more time to recover and grow, and allows you to keep contributing to your pension, with the added benefit of tax relief and any employer contributions.

 

8. Consider re-entering the workforce

If you are already retired, you might consider returning to work, either full-time, part-time, or freelance. This could help ease the pressure on your pension. Just be mindful: if you have already begun drawing taxable income from your pension, the money purchase annual allowance is triggered. This limits the amount you can contribute to your pensions (including tax relief and employer contributions) to £10,000 per tax year (under current legislation and applicable for the current 2025/26 tax year).

 

Get in touch

If you are concerned about how market volatility might impact your retirement savings or want to review your financial strategy, our team of expert Chartered Financial Planners are ready to support you. Contact us to discuss how to safeguard your retirement and ensure your plans remain on track.

Ramsbottom office: Email enquiries@rosebridgeltd.com or call 01204 300010
Chester office: Email enquirieschester@rosebridgeltd.com or call 01244 569141
Leeds office: Email enquiriesleeds@rosebridgeltd.com or call 0113 243 7100

 

Please Note

Levels, bases, and reliefs from taxation may be subject to change. The Financial Conduct Authority does not regulate tax advice. This information is for general purposes only and does not constitute advice. A pension is a long-term investment, not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can fall as well as rise, which may impact the level of pension benefits available.

 

[1] The rates were set by the Pensions Commission in 2004 and updated by the Resolution Foundation in 2024. They vary by gross earnings and range from 50% for those earning over £74,600 to 86% for those earning less than £17,000. Sources: Pensions: Challenges and Choices. The First Report of the Pensions Commission, Pensions Commission, 2004. Broome and Mulheirn. Perfectly adequate? Resolution Foundation, 2024.

[2] Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.