Pension fund returns are becoming more subdued and withdrawal rates are increasing, according to new data from Moneyfacts UK.

The Moneyfacts UK Personal Pension Trends Treasury Report has revealed that the average pension fund return in 2018 fell by 2.9 per cent, at the time of writing.

The year has been a volatile one so far. In Q1, there was an average pension decline of 3.8 per cent, followed by growth of 4.4 per cent and 0.9 per cent in Q2 and Q3 respectively. Q3 saw 40 per cent of funds failing to deliver any growth at all.

In Q4 so far, between 1 and 22 October, there has been an average fall of 4.1 per cent.
This marks a significant downturn in returns, as the average pension fund delivered growth of 15.7 per cent and 10.5 per cent in 2016 and 2017 respectively.

Moneyfacts head of pensions, Richard Eagling commented: “Pension freedoms have placed a much greater onus on individuals to take control of their own retirement planning, and in an environment where freedom has been so positively promoted, it is no surprise that the most flexible decumulation product drawdown has become the most popular choice.

“However, in facilitating this trend pension freedoms have encouraged far greater numbers of individuals to take on the longevity and investment risks associated with drawdown themselves.”

The decline in pension performance comes at a time when the latest Financial Conduct Authority research shows that drawdown policies where a regular withdrawal is being made, the withdrawal rate has increased to 5.9 per cent in 2017/18.

Eagling added: "It is still unclear as to whether drawdown customers are making sustainable withdrawals, although the fact that the average pension fund is down by 2.9 per cent so far this year indicates that this could soon be a greater issue.”

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