UK pension funds grew by more than 15 per cent last year, making 2016 the best year for pensions since 2009, figures from Moneyfacts revealed.
The survey covered approximately 5,500 funds with an ABI Sectors classification, which are used by both defined contribution pension schemes and drawdown providers.
It found that the average fund ended 2016 up 15.7 per cent.
The last time pension funds returned more than 15 per cent was in 2009, when recovery from the 2008 crash saw average growth of 22 per cent.
It represented a 13 percentage point increase on pension fund returns of 2.6 per cent in 2015 and the fifth consecutive year of pension growth, after the 4.6 per cent loss in 2011.
But while the 15.7 per cent figure was an average across funds, it did not take account of capital allocation to these funds.
UK funds did significantly worse than many of their overseas counterparts. UK All Companies funds returned on average 9 per cent, while UK Smaller Companies returned 6 per cent.
Balanced funds - the most popular default investment option for workplace pension schemes - returned under the 15 per cent average, with 10 to 12 per cent.
Of all the pension funds surveyed, the vast majority (94 per cent) delivered positive growth during 2016.
By far the highest-returning sector, as defined by the ABI, was the commodity and energy sector, which saw growth of 70.9 per cent over the year.
Global emerging markets were number two, returning 32.4 per cent, followed by North America Equities, at 31.2 per cent.
The strong performance of pension funds also mirrored that of UK equities, with the FTSE 100 index rising 900 points over the year, from 6,242 on 1 January to 7,142 on 31 December.
Richard Eagling, head of pensions and investments at Moneyfacts, said the discrepancy between overseas and domestic funds was in part down to the dramatic fall in the value of the pound following the Brexit vote.
Overall, though, he said 2016 would be remembered as "a productive year" for pension and drawdown funds.
“Defined contribution pension schemes and income drawdown are in the spotlight like never before," he said.
"The record numbers saving into defined contribution pension schemes and using income drawdown have placed even greater importance on the ability of funds to deliver strong performance if individuals are to have any chance of generating a reasonable retirement income."
james.fernyhough@ft.com
