Major stock market moves on one day could prompt nearly 60% of income drawdown investors to revamp their portfolios, with 21% moving their money into cash, according to a new study.

While 33% of drawdown investors would remain “steadfast” and never make changes to their investments, no matter how much stock markets fell, the majority said they would overhaul their portfolios.

In the event of major stock market moves, 59% would move their money into a broader mix of asset classes while 21% would move their money into cash. DIY investors were more likely to move into cash than advised investors.

Of the 67% who expressed worry about major stock market moves, markets would need to plunge in a “mini-stock market crash” by 7.5% in one day to spook investors enough to shift their income drawdown retirement pots, according to the study.

The review from Canada Life - based on research of 500 income drawdown investors aged 55+ in November - suggests that risk tolerance among income drawdown investors has a limit. While many will tolerate modest stock market movements substantial numbers would consider major changes to their investments if stock markets showed major falls in one day.

In 2018 the FTSE 100 fell by 12.5% - it’s biggest drop in a decade. One of the biggest falls in the FTSE 100 in 2018 was seen in December when it fell by 3.15% on one day

One day day falls of over 7.5% are very rare but do happen. During the famous ‘Black Monday’ FTSE crash of October 1987 the FTSE fell by 20% over a few days and over 10% on two single days.

Canada Life believes its research suggests that most drawdown investors are broadly a “risk tolerant bunch with a third (33%) prepared to weather a storm and make no changes to their portfolio no matter how much the stock market fell in one day.”

Canada Life found differences between DIY and advised investors.

In the event of market falls, DIY investors told Canada Life they were more likely to see cash as a safe haven (25%) and less likely to move to a mix of asset classes (50%) compared to people who have an adviser relationship – of whom 18% said they would move to cash with a further 66% switching asset classes.

Andrew Tully, Canada Life technical director, said: “The majority of drawdown investors show they will remain remarkably resilient in times of stock market volatility and global economic uncertainty. 

“Far from knee-jerk reactions to the latest breaking macroeconomic news, our research suggests most people using drawdown to fund their retirements are sensibly taking a longer term view.”