Over the past few weeks, some clients have reached out with a similar question:
“Should we move a large chunk of my pension into cash to protect it from volatility?”
It’s a perfectly understandable instinct.
As you move from accumulation to drawing an income, markets can feel less like opportunities and more like threats. And with newspaper chatter about the upcoming UK Budget building by the day, it would be surprising not to feel a bit unsettled.
So let’s talk about it - calmly, clearly and humanly.
Uncertainty is completely normal - it always has been and always will be
One thing we often remind clients of is this:
Uncertainty is the natural state of investing. It is always with us.
It’s tempting to believe that what we’re living through right now is uniquely unstable or somehow worse than usual. But history shows that uncertainty never disappears. If anything, the moments when everything appears to be calm, predictable and “plain sailing” are often when risk is quietly building under the surface.
Those periods can lull investors into taking on more risk than they realise, just as noisy periods can trick them into retreating too far into cash.
The goal isn’t to wait for certainty - it’s to build a plan that works because uncertainty exists, not in spite of it.
Why these worries show up now
Clients often find that their mindset shifts dramatically at or near retirement.
During accumulation, volatility feels like a feature of long-term investing. During decumulation, volatility suddenly feels like a threat to lifestyle stability.
That shift is completely normal.
In fact, it’s a deeply human reaction: once you stop earning and start spending your pension, the psychological weight of every market wobble increases.
People instinctively want to “lock in” their portfolio and create certainty. But here’s the key:
The solution is almost never to move half - or more - of your portfolio to cash.
The solution is to structure your income sensibly so that volatility can’t hurt you.
Why large cash moves rarely help
Cash has an obvious emotional appeal: no volatility, no surprises, no headlines.
But large cash positions also come with hidden risks:
- Inflation quietly erodes value.
- Opportunity cost reduces long-term sustainability.
- Re-entry timing becomes a psychological trap (“When is it safe to get back in?”).
- Portfolio imbalance can harm future income far more than short-term volatility ever would.
A much better approach is something we call the three-year cash buffer.
The Three-Year Rule: how to protect yourself properly
Instead of trying to shield the whole portfolio from volatility, we isolate the part that really matters:
Three years’ worth of withdrawals and fees held safely in cash-like assets.
For example, if you need £50,000 a year, we’d hold around: £50,000 × 3 = £150,000.
This creates a simple, powerful safety net:
- You can draw income without touching investments during a downturn.
- The remaining portfolio stays invested for the long term.
- You avoid selling assets at the wrong time.
- You escape the emotional rollercoaster of “Do I move money back into markets now… or later… or never?”
This structure protects you without derailing the long-term plan.
A quick word on annuities
We’re also seeing more people ask whether an annuity might help. For some clients, building in a base layer of guaranteed income makes emotional and mathematical sense.
Annuities aren’t for everyone, and they’re not something you have to rush into. But they are very much back on the table as a sensible part of retirement planning - especially for clients who value certainty over potential upside.
If you want to explore them, we’re more than happy to discuss.
And then there’s the UK Budget…
It wouldn’t be a British Budget season without a bit of scaremongering.
You may have noticed a familiar theme in the press:
Reports suggesting that every possible tax-raising measure is being floated, hinted at, speculated upon or “leaked” to test public reaction.
Here are a few grounded thoughts:
1. The 25% pension tax-free lump sum
This seems to get rumoured every single year.
It was first whispered about in 1995 - just eight years after it was introduced - and it has resurfaced at least a dozen times since.
There is no serious political appetite to remove it, and the latest round of rumours can be safely filed away with all the others.
2. Income tax and National Insurance
My sense is that we may see:
- a rise in the basic rate of income tax, and
- a corresponding cut in National Insurance,
likely framed as protecting “the workers”.
What this means for you will depend on the sources of your income, but we’ll interpret and advise once details are clear.
3. The bigger picture
What we’re unlikely to hear is any acknowledgement that, as a nation:
- We’ve been living beyond our means for the better part of 20 years.
- And while everyone knows it, the political will to tackle it is less certain.
But none of this gets decided in newspapers.
And none of this warrants emotional or reactionary changes to your long-term plan.
What matters most
Markets are noisy.
Budgets are noisy.
Headlines are noisy.
But your financial plan is built to withstand noise.
If you’re worried, or feeling the natural shift toward wanting more certainty in retirement, talk to us. No question is too small, too early, or too emotional.
And as always…
Please reach out if you’d like a quick call or Zoom to review your cash buffer, your drawdown strategy, or the potential impact of the Budget on your situation.