What does each stress test assume?
Nine scenarios, each with fixed parameters: two market falls, two inflation runs, two longer lives, two income shocks and a 15% currency fall. Five are measured from history, four are chosen.
Each stress test changes the rates or income your plan sees in particular years; the arithmetic itself is the same as your plan’s. Some magnitudes are measured — taken from a named historical series and set at or below what actually happened. Others are chosen — a severity Nivritee picked as a deliberately hard test, with no claim about history.
| Test | What it changes | Basis |
|---|---|---|
| A 2008-style crash | Your savings fall 35% in a single year, five years after you stop working. The fall replaces that year’s return. | Measured: the worst twelve months of 2008 on the OECD share price indices were −46% (US), −45% (Japan), −35% (UK). |
| A dot-com style slump | A 25% fall in a single year, one year after you stop working. | Measured: the worst year of the 2000–03 decline on the OECD US index, −25.6%. |
| A sustained inflation shock | General, medical and education inflation each 4 points higher for 7 years, starting two years from now. Prices stay higher afterwards. | Measured: US consumer prices averaged 8.8% a year in 1973–82 against 2.8% before. |
| An India-style inflation run (plans settling in India) | All three inflation rates 3.5 points higher for 5 years, starting next year. | Measured: India’s consumer inflation averaged 10.3% in 2009–13 against 4.9% the decade before. |
| You live five years longer | The plan runs five more years, with the same spending. | Chosen. |
| You live ten years longer | The plan runs ten more years. | Chosen. |
| Two years out of work | Income stops completely for two years, starting three years from now. | Chosen. |
| A five-year career break at half pay | Income halves for five years, starting two years from now. | Chosen. |
| Your money abroad buys 15% less (plans holding another currency) | In the year you stop working, everything you hold, earn, pay or expect in another currency loses 15% of its value in your plan’s currency, and stays there. | Measured: the US dollar bought about 11% fewer rupees between January and November 2007; the pound bought about 15% fewer dollars between May and October 2016. |
Why they are milder than history
A stress test that only a once-a-century event could justify is one people dismiss. So each measured test sits at the mild end of its episode: 35% for 2008, when markets fell about half from peak to trough; four points of extra inflation, when the 1970s ran nearly six.
How the timing works
- Market falls are placed after you stop working, when there is no salary to ride them out with.
- Inflation and income shocks are placed a year or a few years from today.
- The currency fall hits the money you hold in another currency as it has grown by then — not your whole savings — and money you save in your plan’s own currency is untouched.
- Longer life adds years at the end, at the same spending.
Sources
- Financial Market: Share Prices for United States (SPASTT01USM661N), OECD data — Federal Reserve Bank of St. Louis (FRED)
- Financial Market: Share Prices for Japan (SPASTT01JPM661N), OECD data — Federal Reserve Bank of St. Louis (FRED)
- Financial Market: Share Prices for United Kingdom (SPASTT01GBM661N), OECD data — Federal Reserve Bank of St. Louis (FRED)
- Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) — Federal Reserve Bank of St. Louis (FRED)
- Inflation, consumer prices (annual %) — India (FP.CPI.TOTL.ZG) — World Bank
- Indian Rupees to U.S. Dollar Spot Exchange Rate (EXINUS), monthly — Federal Reserve Bank of St. Louis (FRED)
- U.S. Dollars to U.K. Pound Sterling Spot Exchange Rate (EXUSUK), monthly — Federal Reserve Bank of St. Louis (FRED)
See this in your own plan.
Open Retirement TrackerLast reviewed 1 October 2026.