Pension fund growth is becoming more subdued and could lead to funds ending the year in the red, comparison site Moneyfacts has warned.
According to data published in Moneyfacts UK Personal Pension Trends Treasury Report, 2018 could see the first year-on-year loss for these funds since 2011.
The average pension fund value was found to have fallen in the first quarter of 2018, before reversing in quarter two and seeing some positive growth in the third quarter.
The average growth over this calendar year to the end of Q3 has been 1.2 per cent but in October funds fell by 4.1 per cent on average, meaning they could end up seeing an annual decline of 2.9 per cent, Moneyfacts said.
Even the highest average growth of 4.4 per cent – registered in the third quarter - was deemed low when compared with previous years.
Pension funds had an average growth of 15.7 and 10.5 per cent in 2016 and 2017, respectively.
Quarterly pension fund growth |
Period | % pension fund growth |
Q1 2018 | -3.8% |
Q2 2018 | +4.4% |
Q3 2018 | +0.9% |
Q4 2018 to date (1 October 2018 to 22 October 2018) | -4.1% |
The report also showed the withdrawal rate of people regularly accessing their pension pots had increased from 4.7 per cent in 2016/17 to 5.9 per cent in 2017/18. This was based on Financial Conduct Authority drawdown figures.
Richard Eagling, head of Pensions at Moneyfacts, said it was still unclear whether drawdown customers were making sustainable withdrawals, although he said "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".
He said: "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."
maria.espadinha@ft.com
