Any hopes of calm after Monday’s market bounce didn’t last long. The FTSE 100 slipped again on Tuesday (9 April), dragged down by another red day on Wall Street, with the S&P 500 hovering near bear market territory. And it’s not just stocks feeling the pressure — UK government bond yields have surged too.
The 30-year UK gilt yield jumped to 5.64%, its highest since 1998, after US Treasury yields rose sharply. That’s well above the previous high of 5.472% from January.
So, what does this mean if you’ve got a pension or are close to retirement?
Why This Matters More Now
Market dips like this have a wider impact than they used to. That’s because most UK workers today are in defined contribution pension schemes, rather than defined benefit ones. With auto-enrolment, many people are now investors without even realising it.
Most default pension funds hold a mix of shares and bonds, and recent events have shaken both. You’re not alone if you’ve looked at your pension recently and seen it drop.
But for anyone years away from retirement, there’s usually no need to make big changes. Regular monthly contributions are still buying investments, and lower prices can be a good thing in the long run.
For Those Closer to Retirement…
Things are a little trickier if you’re about to start drawing from your pension. For example, if you were planning to take a 25% tax-free lump sum soon, doing so now might mean selling at a loss. Some people might need to delay those withdrawals or rethink their timing altogether.
This comes on top of changes coming in 2027, when unused pension funds will start being counted as part of inheritance tax. That’s already pushed some people to consider drawing down earlier than planned, which is now complicated by current market conditions.
What About Defined Benefit Pensions?
If you’re in a defined benefit (DB) scheme, the recent market moves are less likely to affect you directly. Payments are usually fixed and guaranteed. That said, the turbulence in bond markets might bring back memories of the 2022 gilt market shock. A repeat of that scenario is unlikely, but it’s understandable if it feels a bit familiar.
Market volatility is a feature, not a bug. And as uncomfortable as this dip may be, it’s not unusual. If you’re not sure how this affects your plans, it might be a good time to speak to a financial adviser. Especially if you’re juggling pension withdrawals, tax changes, and big decisions about when to retire.
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