Net retail sales outflows reached £4.5 billion in October, representing the weakest month since October 2024, according to data released today by the Investment Association.
The figures were a sharp increase on September’s more modest outflows of £536 million. Equity funds were hit hardest, with £5.0 billion in withdrawals as all regions moved into outflow, led by steep redemptions from Global and UK equities.
While below last October’s £5.8 billion in outflows, this month’s figures again reflect heightened investor caution ahead of the Autumn Budget, with focus on potential tax increases to address the fiscal deficit making long-term financial planning more challenging.
Concerns around exposure to US technology stocks and a potential “AI bubble” also weighed heavily, with the IA’s Technology & Technology Innovation sector recording its largest ever outflow (£322 million), while risk-off sentiment was seen across equities.
Key findings for October 2025
- Equity outflows rose to £5.0 billion in October, nearly double September’s £2.6 billion. All regions saw redemptions, with Global equities (-£2.5 billion), UK equities (-£1.4 billion) and North America equities (-649 million) particularly weak. However, UK outflows remain below peaks seen previously.
- Fixed income flows were broadly flat, posting -£2 million in October, but were down substantially from £819 million of inflows last month. Investors continued to favour £ Strategic Bond (£427 million), £ Corporate Bond (£252 million) and Corporate Bond (£193 million). Government Bonds (-£381 million) and UK Gilts (-£167 million) continued to see steady outflows.
- Global Emerging Markets Bond – Local Currency attracted £109 million, continuing a six-month inflow trend as investors search for yield outside of developed markets.
- Money market funds remained stable, with £1 million inflows. This follows a robust year-to-date for the asset class, with total inflows reaching £5.22 billion, which has become increasingly popular for professional buyers taking a ‘wait and see’ approach for markets to become more advantageous and for more cautious investors.
- Mixed asset funds came under pressure at -£51 million, posting their first outflows since October 2024.
Index tracker funds posted modest inflows of £306 million, underscoring widespread subdued sentiment.
Equity funds fall across all regions
Equity outflows almost doubled in October to £5.0 billion, up from September’s £2.6 billion, and higher than the £4.5 billion in outflows in October 2024.
A noticeable loss of risk appetite was seen across Asia and Japan, with investors reacting to concerns over regional economic momentum and policy uncertainty. Asian equity outflows widened to £410 million, driven partly by ongoing selling in Indian equities, which recorded £112 million in redemptions, albeit easing from September’s record levels.
In Japan, worries over fiscal sustainability and the long-term debt outlook under new Prime Minister Takaichi contributed to increased outflows of £212 million. North America saw a similar shift in sentiment as fears of an AI-driven valuation bubble and concentration risk in major US technology names pushed outflows sharply higher to £649 million, as Global equities followed suit with redemptions of £2.5bn.
Closer to home, UK equities faced another difficult month with outflows accelerating to £1.4 billion, the region’s worst flows since March. The UK Smaller Companies sector saw redemptions deepen to £151 million, its weakest month since January. These moves may signal rising investor concern about the domestic economic backdrop and potential tax increases.
Meanwhile, sector-specific pressures were notable, with the IA’s Technology & Technology Innovation sector recording £322 million in outflows, its largest on record, reflecting wider caution around stretched tech valuations and the durability of AI-driven growth themes.
Technology & Technology innovation NRS 2021 – October 2025
Outflows for bonds and flat flows in mixed assets
Fixed income shifted into outflows overall in October, reaching -£2 million, following £819 million of inflows in September.
Fixed income investors favoured £ Corporate Bond (£252 million), £ Strategic Bond (£427 million) and Global Emerging Markets Bond – Local Currency (£109 million) sectors. However, these inflows were outweighed by continued redemptions from sovereign debt, including Government Bonds (-£381 million) and UK Gilts (-£167 million), reflecting caution towards developed-market government bonds and uncertainty over the pace of upcoming Bank of England rate cuts.
For the first time since October 2024, Mixed asset funds saw outflows of £51 million. In particular, the Mixed Investment 40-85% Shares sector recorded its first outflows (-£111 million) in 12 months, potentially due to investors crystallising gains in equity-heavy portfolios ahead of anticipated tax changes in the Budget, as well as risk-off positioning amidst concerns about the long-term sustainability of the US market. Despite this, outflows remained below the -£635 million pulled from mixed asset funds in October 2024.
Money Market Funds had a flat month in October, with inflows of £1 million. This follows a robust year-to-date for the asset class, which has become increasingly popular for professional buyers taking a ‘wait and see’ approach for markets to become more advantageous as well as forming a key part of ‘cautious’ portfolios. Outflows were concentrated in the Short Term Money Market sector (-£207 million). Additionally, Tracker funds had a damp month with just £306 million inflows, reflective of a weak overall picture for fund flows. Outflows from active funds reached their worst level since October 2024 at -£4.8 billion for the month.
Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said:
“October’s data indicates a marked decline in investor sentiment as investors responded to speculation ahead of the Autumn Budget around potential changes to pensions tax. This saw investors take £4.5 billion from funds, the weakest month since October 2024. In the end, the Chancellor did raise the rate of tax on dividends by 2%. The Chancellor didn’t touch the tax-free pensions lump sum but, again this year, we saw reports of people taking their money out based on speculation over a tax raid. The Budget’s impact on November fund sales remains to be seen but a further month of Budget speculation could lead to another substantial outflow.
“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. 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.
“The government’s wider focus on strengthening the UK’s retail investment culture and building on the Leeds Reforms has been welcome. And they built on this in the Budget, announcing support from major firms for launching ‘Investing in Britain’ hubs, using the IA and Association of Investment Companies’ funds sectors to help signpost UK equity funds, ETFs, investment trusts and shares. The lower cash ISA limit announced at the Budget may prompt people to reassess their options and to invest but it also underlines the importance of financial literacy to enable people to make informed long-term decisions about saving and investing their money. The nationwide industry-led retail investment campaign will have an important role to play in raising awareness about the benefits investing can bring to their long-term financial wellbeing.
