UK retail investors withdrew a net £4.5bn from funds in October, the latest figures released by the Investment Association (IA) have shown.

This marked the weakest month since October 2024 as investor caution crept in amid the speculation in the build-up to the Budget.

October’s figures were also a sharp increase on the more modest outflows of £536m that the IA reported for September.

Equity funds recorded the largest impact with £5bn in withdrawals as all regions moved into outflow, led by steep redemptions from global and UK equities.

In the UK equities space, outflows accelerated to £1.4bn, the UK’s worst flows since March, while the UK smaller companies sector also saw redemptions deepen to £151m, its weakest month since January.

The IA suggested these moves may signal “rising investor concern” about both the domestic economic backdrop and potential tax increases.

IA director, market insight and fund sectors, Miranda Seath, commented that October’s data indicates a “marked decline in investor sentiment”, as investors responded to speculation ahead of the Budget around potential changes to pensions tax.

“Now with this year’s Budget now in the rearview mirror, we can expect to see further changes to investor behaviour in the coming months,” Seath said.

“The introduction of targeted tax increases – including the freeze on income tax thresholds, higher rates on property and savings income, and the new cap on pension salary sacrifice – has made long-term financial planning more complex for households and savers.

“While headline tax rates remain unchanged, the practical impact of fiscal drag and incremental tax rises means investors will be reassessing their ability to put money aside to invest and a more uncertain economic outlook could affect risk appetite.”

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