Do I need to change my pension plans?

The wild swings in financial markets over the past two weeks have left many wincing as they assess the impact on their retirement savings.

The partial reversal of trade tariffs imposed by the US on 2 April has seen a significant chunk of the initial losses recovered, but markets remain volatile and many retirement pots are lower than they were a month ago.

But how much do you really need to worry about this volatility, and do you need to change your retirement plans now? Much depends on exactly how long you’ve been saving and how soon you plan to retire. Here we lay out the considerations for people at different stages in their retirement savings journey.

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More than 10 years until retirement

Anyone with 10 years or more until they need their pension money has the least to worry about from the market falls.

A little bit of stock market history tells us why. When markets fall 20% below their peak, this is termed a ‘bear’ market. Once prices have risen 20% from their lows it returns to being a ‘bull’ market. Recent work by Goldman Sachs¹ showed there have been 30 bear markets in the US shares since 1835.

On average, it has taken 54 months to recover the losses from the bear markets that have happened in that time. But that’s not the whole story. Goldman Sachs identified three types of bear market, each differing in severity. 

The worst are ‘structural’ bear markets, caused by systemic imbalances or price bubbles, which take an average 111 months to recover. Then come ‘cyclical’ bear markets, caused by periodic economic slowdowns, which last an average 29 months.

Finally come ‘event driven’ bear markets - those triggered by one off shocks - which last an average 12 months. 

Goldman has put the most recent falls - which in the US have touched bear market territory - in the ‘event driven’ category. It suggests the falls we’ve seen stand a good chance of being made up in the months ahead, although that can’t be guaranteed.

Money held in a pension cannot typically be accessed before age 55 anyway (rising to age 57 from April 2028) so there is no need to sell investments and crystalise a loss - you can just wait it out.

What’s more, a fall in markets means the money you contribute now will be being buying assets at lower prices, so it’s important to continue contributions through periods like this so as to improve your returns when markets do recover.

• Read our full Retirement plan checklist: 10 years from retirement

Five years from retirement

If you are five years from retirement you have less time for any falls to be made up, but there’s still a fair chance you’ll achieve that.

Lower prices now can also work in your favour if you are making contributions because you’ll get more assets for your money. Those five years out often still do have lots of contributing ahead of them because it’s common to accelerate pension saving in the run up to retirement.

What’s more, you are unlikely to have been as exposed to stock market falls as younger savers. Those paying into workplace pensions, for example, often contribute to default funds which will gradually shift money towards safer assets like bonds and cash as retirement approaches.

That’s also likely to be true of anyone saving with the help of a financial adviser.

The task at this stage in the retirement countdown is to ensure you have the right mix of assets to match your plans for using your retirement savings in the future.

• Read more about your retirement income options

Those planning on using all their money to buy an annuity - the product that takes your savings and provides a guaranteed income in return - may want to consider shifting gradually out of shares and into bonds, where performance is less volatile and any falls are likely to be compensated for by a higher annuity return in the future. 

If the plan is to leave your money invested after retirement to take an income, you may still want exposure to shares, but with a mix of bonds and cash too to prevent your pot suffering sudden falls in the future. 

Those approaching retirement can make use of ready-made investment options to suit their needs by picking one of four Investment pathways.

• Read more about Investment Pathways

If you’re unsure, it’s a good idea to take advantage of Pension Wise, the government-backed guidance service. This free and impartial advice can help you understand your options, make informed decisions and avoid costly mistakes. Booking an appointment well in advance will give you time to consider your choices and refine your retirement strategy accordingly. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 138 3944.

Our team of retirement specialists can also provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge. 

• Read our full Retirement plan checklist: 5 years from retirement

Two years from retirement

With just two years left before you retire there is less time to make up sudden falls (although that can still happen). Ideally you will be clear on how you’re going to access your money, and therefore whether your pot will stay invested and have a chance for losses to be recovered.

If not, use the resources listed above to get some help.

Work out what other savings and other sources of income you have that you can use instead of accessing your pension money. 

One option to help preserve your pot when you do retire is to take only the income that is produced naturally from dividends and bond interest. This means you could avoid selling assets and giving then a chance to recover.

Consider whether you need to take your tax-free cash - known as the Pension Commencement Lump Sum. By leaving this money (worth 25% of your pot up to a limit if £268,275) untouched and invested you will give it a chance of recovering.

• Read our full Retirement plan checklist: 2 years from retirement

Source:

Goldman Sachs - 8 April 2025

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.