Pension funds suffered their biggest losses last year since the financial crisis in 2008, data from Moneyfacts has shown.
The Moneyfacts UK Personal Pension Trends Treasury Report showed a marked deterioration in pension fund performance during the fourth quarter of 2018, with the average pension fund suffering a 7.3 per cent fall in this period.
This left pension fund growth at minus 6.2 per cent for 2018.
This is the worst performance since 2008, when pension fund growth stood at minus 19.7 per cent, according to Moneyfacts.
Most pension funds struggled to generate positive returns during 2018, with only 9 per cent of funds in positive territory, the data showed.
The worst affected ABI pension fund sectors were UK smaller companies (minus 13.9 per cent), Europe including UK equities (minus 13.6 per cent) and Europe excluding UK equities (minus 12.1 per cent).
Other sectors that suffered double-digit losses were commodity and energy (minus 10.4 per cent), global emerging markets (minus 11.5 per cent), Japan (minus 11.2 per cent) and UK All Companies (minus 11.9 per cent).
UK direct property was the only ABI pension sector to deliver returns of any note at 4.4 per cent.
Until last year, pension freedoms had been operating within an environment of positive pension fund returns, with the average pension fund enjoying strong growth in 2016 at 15.7 per cent, and 10.5 per cent growth in 2017, Richard Eagling, head of pensions at Moneyfacts, pointed out.
He said 2018's market downturn will increase the focus on investment decisions made by pension savers and drawdown investors.
Mr Eagling said: "The extent of the losses experienced by pension funds last year, combined with the return of greater volatility, raises the question as to whether pensions savers and drawdown investors will be sufficiently alarmed to adjust their investment strategies and reduce their exposure to stock markets.
"The other threat posed by falling pension fund returns is that it could undermine efforts to encourage greater personal pension contributions."
Average annual pension fund returns
% pension fund growth
Source: Moneyfacts UK Personal Pension Trends Treasury Report/Lipper Reports
Dean Mullaly, managing director at Mark Dean Wealth Management, said he is not surprised by the figures as 2018 saw markets fall across the board.
He said: "Trump, Brexit and the slow down in China were three major threats in 2018 that saw performance suffer.
"According to my own 2018 analysis, the FTSE reached its peak on 22 May and declined by 11.66 per cent overall that year.
"I expect the markets to perform better this year as we get some resolution to Brexit, while it is less likely there will be a rise in US interest rates this year."
Andrew Pennie, head of pathways at Intelligent Pensions, said: "With a growing number of people keeping their pension invested since pension freedoms, these performance figures highlight the damage that can be done to someone's retirement fund and the long-term feasibility of their retirement plans.
"This is particularly true where somebody has to sell equities to fund their need for income/cash as they could be crystallising losses that the remaining portfolio will find hard to compensate.