5 costly pension mistakes to avoid in 2020

5 costly pension mistakes to avoid in 2020

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.

It would be fair to say that many people’s pension plans have been disrupted – if not derailed – by the events surrounding COVID-19 in 2020. Perhaps you hoped to retire this year only to find out that your pension savings had fallen with the markets in the first quarter (Q1). Or, maybe you had plans to withdraw your 25% tax-free lump sum from your pension to pay for that hoped-for home improvement or world cruise. 

Here at Cedar House, our financial advisers understand these frustrations and want to ensure that people make wise decisions about their retirement in light of the circumstances we all find ourselves in, in 2020. Below, we offer 5 costly pension mistakes to avoid which have come into sharper focus with COVID-19. We hope you find this content helpful. For more information and personalised financial advice, please contact our team via:

020 8366 4400 or


#1 Don’t deviate from the strategy

In Q1 of 2020, pension funds fell by an average of 15% as the markets rocked from COVID-19. By mid-March, Wall Street had suffered its worst performance since 1987, which was mirrored around the same time by other indices across the world, including the FTSE 100. Within such circumstances, it’s natural for people to want to react impulsively to “protect” their savings from further damage. Yet deviating from your long-term investment strategy in this manner can result in crystalising your losses in the short-term, and excessively eroding future investment growth.

If you have concerns about your investment strategy for your pension in light of COVID-19, we recommend consulting your financial adviser. They are there to listen to your concerns and help determine whether your investment goals, time horizon and risk tolerance have changed.


#2 Don’t assume early retirement

Whilst it’s important to not jump out of the stock markets or sell impulsively, it’s also crucial to not simply assume that your pension plans are unaffected by the events of 2020. Admittedly, those near retirement likely experienced fewer investment losses in the wake of COVID-19, as these portfolios are typically weighted in favour of lower-risk assets such as cash and bonds. However, even highly “cautious” or “defensive” portfolios have not completely avoided large disruption in early 2020. Be careful, therefore, to discuss your early retirement plans with your financial adviser to ensure that your plans are still on track. 


#3 Be careful about market timing

Whilst some pension savers will want to act cautiously with their investments moving further into 2020, others might be inclined to react in the opposite direction. In late April 2020, for instance, The Telegraph ran an article showing how millennials were “piling into oil and gold” with their investments to try and capitalise on the low oil price, whilst hedging against market volatility via gold. Timing the market like this can come with significant risks, so it’s important to discuss your ideas with your financial adviser if you are considering this as a way to recoup some pension losses from earlier in 2020. 


#4 Reconsider DIY investing

Whilst many people are perfectly capable of managing certain aspects of their money (e.g. cash savings), investing for your retirement involves considerably more long-term planning and plans for mitigating unnecessary taxes, fees and investment risks. Unfortunately, many people who have taken a “DIY” approach to their portfolio, in an attempt to try and save money on getting professional help, have suffered excessive losses in early 2020 in the wake of COVID-19. Those who took out an annuity in late 2019 will have perhaps been most shielded from the short term damage in Q1. If you are in need of an extra pair of eyes to help address their issues in your self-made pension portfolio, our financial advisers are here to help.


#5 Be careful with the tax-free lump sum

Many people planned to withdraw up to 25% of their tax-free lump sum from their pension in 2020; an option open to most UK pension savers over the age of 55. Sadly, the declining value of many pension funds in Q1 has made this option more complicated for many people. Those who withdraw money from their pension in a falling or fluctuating market, such as the one we have seen so far in 2020, risk disproportionately undermining the long-term growth and sustainability of their pension savings. 

It’s very important to discuss your tax-free lump sum with your financial adviser if you are still considering this option in 2020. It may be that the house renovation needs to wait a bit longer until the markets (and pension funds linked to them) start to show stronger signs of recovery. In certain cases, it might still be possible and appropriate to withdraw a much-needed lump sum within the current circumstances. Yet such decisions are likely to be the exception rather than the norm in the present environment.



Caring for your pension is always important, yet given the events on 2020 it’s possibly more important than before to be aware of the decisions open to you, and their implications.

If you would like to discuss your financial plan with a member of our team, then get in touch today to arrange a free consultation:

020 8366 4400 or


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