Some defined contribution savers might see their potential retirement income reduced by up to 20%, the Society of Pension Professionals has said, but it warns against knee-jerk reactions to market volatility.  

Given the scale of the equity market falls since early April 2025, and the fall in government bond yields, it is possible that some DC savers may see a reduction in potential retirement income of up to 20%, the SPP has said.   

“The world is again enduring a period of financial turbulence, and this has naturally created some uncertainty for UK savers and investors,” said Simon Daniel, chair of the SPP’s investment committee. “The overall message from this paper is that making significant, reactive changes to pensions and other savings is generally not ideal compared with keeping a cool head and planning carefully.” 

DC savers might want to delay taking their pension, with the SPP saying that “this may be a sensible step if markets are to recover in the short term but unfortunately nobody knows if a short-term recovery is likely”.   

Taking money out when markets are down bakes in sequencing risk, where the amount remaining invested is lower and therefore produces lower returns. Deferring retirement will allow a savings pot to potentially participate fully in any bounce-back, but it also means that it remains exposed to the risk of another downturn.  

As some people will have withdrawn funds at the bottom of the market a few weeks ago, they would have missed out on subsequent recoveries.  

“It is important not to panic, to remember that pension investments are designed for the long term and are frequently subject to bumps in the road,” from which they recover over varying periods, the SPP said.  

It called on the government and the pensions industry “to remind UK adults that making significant, reactive changes to pensions and other savings generally leads to poor outcomes, compared to cool heads and careful planning”.   

It argued in favour of regular saving into a pension across a diversified portfolio of investments to mitigate risk, adding that “consequently, steps that limit investment freedom can be unhelpful”.   

Falling markets can provide opportunities, it stated. “The challenge is how individuals can adapt their portfolio as they near retirement – a challenge that the pensions industry is continuing to tackle.”  

Are steep losses the price paid for high returns, or should DC schemes avoid exposing savers to high volatility?