When falling markets meet retirement in Portugal
The art of sequencing risk.
I have worked with clients through all kinds of market cycles: rising markets, sharp falls and the uncertain periods in between.
One thing that experience has reinforced is that a fall in markets feels very different when your investments are paying for your everyday life.
While you are working, you may have a salary covering the bills and time to leave your investments alone. Once you retire, those same investments may need to pay for the house, the holidays and the life you have worked hard towards.
For UK expats living in Portugal, that can mean drawing from a UK pension, like a SIPP for example, while spending in euros. The balance on the pension statement is only part of the picture.
A worked example
To illustrate why, imagine a couple who have retired to Portugal with a UK SIPP worth £1.8 million. This is a hypothetical example, rather than an account of a particular client.
They have settled into their new home and planned their spending. They intend to withdraw £90,000 a year from the SIPP before tax: 5% of its starting value. That figure is used here to explain the mechanics, not to suggest that 5% is a suitable or sustainable withdrawal rate.
At first glance, £1.8 million extremely looks reassuring. But what happens if the investments inside the SIPP fall by 20%?
The fund drops to £1.44 million before any withdrawals. If they then take their planned £90,000 at the end of the year, they are left with £1.35 million.
They have not suddenly become extravagant. Their planned withdrawal is unchanged. But the capital supporting their future income has fallen substantially.
Now imagine the investments rise by 25% the following year. A 25% gain would reverse a 20% fall if no money had been taken out. Here, however, the recovery applies to the smaller £1.35 million balance. After that growth and another £90,000 withdrawal, the SIPP stands at £1,597,500.
To see why the order matters, reverse those two returns. If the SIPP grows by 25% in year one and falls by 20% in year two, with the same £90,000 withdrawn at each year-end, it finishes at £1,638,000.
Same starting pension. Same two investment returns. Same £180,000 withdrawn. Yet the couple who experience the fall first finish £40,500 worse off.
These simplified calculations exclude fees, tax and inflation. They are not forecasts. They show sequencing risk: the order in which returns arrive can change the outcome when money is being withdrawn. Selling investments during a downturn leaves less capital available to benefit from a recovery.
This is why “markets recover over time” is not, by itself, a retirement income plan. A recovery in markets does not necessarily restore a pension that has also been funding regular withdrawals.
For our couple in Portugal, there is another consideration. At an illustrative exchange rate of £1 to €1.20, their £90,000 withdrawal converts to €108,000 before tax and conversion costs. If sterling weakens to €1.08, the same withdrawal produces €97,200.
To obtain the original €108,000, they would now need to withdraw £100,000. Their euro target has not changed, but the sterling withdrawal has increased by 11.1%. If that happens while the SIPP is falling, the pressure can build from both directions. These are gross figures; the amount available to spend depends on tax and costs.
That is where I would bring the conversation back to what is actually inside the SIPP. The provider’s name tells us where the pension is held. It does not tell us whether the underlying investments fit the income the couple needs.
How much is in shares? Do several funds own many of the same companies? Is there an unexpected concentration in one market or sector? What can be sold readily, and where would the next year’s withdrawals come from? A global portfolio can also have currency exposures that are not obvious from a sterling statement.
I would also want to understand what a loss means to a prospect or clients lives. Could they postpone a major holiday or that gift to family? Or does most of the withdrawal cover spending they cannot reduce? Feeling comfortable with investment risk and being able to afford a loss are two very different things.
The planning starts with their household budget in euros, the income they can already rely on and the gap the pension needs to fill. The gross withdrawals must allow for the relevant tax treatment and charges, with UK and Portuguese tax questions checked by the appropriate specialist.
A planned cash reserve may help cover near-term spending without forcing immediate sales after a fall. Holding some reserves in euros may also reduce the need to convert sterling at an awkward moment. But cash has its own cost: inflation can erode its value, and holding too much may weaken long-term growth. The reserve needs a purpose and a replenishment plan.
We can also explore which spending could flex after a difficult year, whether existing secure income covers essential bills, and whether an annuity for part of the pension merits specialist consideration. Availability for Portuguese residents, currency, inflation protection and loss of flexibility would all matter.
Cashflow modelling really helps make those choices concrete. I would want the couple to see what happens after early losses, a prolonged weak period, higher inflation or a less favourable exchange rate. A projection assuming the same growth every year can miss the problem we are trying to understand. No model can guarantee the outcome. [6]
One final consideration — 'tax planning'
Of course, any retirement income plan needs a sound tax foundation. At Atlas Bridge Wealth, we work with carefully selected tax and legal firms in Portugal, on whom we have carried out due diligence, to help ensure your arrangements meet the relevant tax obligations.
Their specialist advice is a crucial part of the process. We can then incorporate the tax assumptions into your cashflow modelling, giving you a clearer picture of what is available to spend and how your retirement plans hold together.
Final words
A UK pension used for drawdown deserves a plan that looks beyond its headline value. The useful question is how reliably it can support the life its owners want in Portugal, including when conditions are difficult.
At Atlas Bridge Wealth, we bring together retirement objectives, cashflow planning and cross-border circumstances, coordinating with specialist tax and legal professionals where needed.
If you are drawing from a UK pension while living in Portugal, or preparing to do so, you are welcome to book a complimentary 30-minute Discovery Call at
or email info@atlasbridgewealth.com.
Important information.
This article provides general information, not a personal investment recommendation or tax or legal advice. The couple and figures are illustrative. Investments can fall as well as rise, and you may get back less than you invest. Past performance is not a reliable guide to future returns.
Tax treatment depends on individual circumstances and may change. Atlas Bridge Wealth does not provide tax or legal advice; we coordinate with specialist professionals.
Atlas Bridge Wealth • September 2026
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