Interactive Investor

Pension funds grow for sixth consecutive year

11th January 2018 08:44

Edmund Greaves from interactive investor

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Pension holders will be cheered by the news that pension and drawdown funds have had another good year – reaching six consecutive years of growth.  

In yet another sign of economic prosperity beating geopolitical concerns, financial data firm Moneyfacts has found that 95% of the 5,632 pension funds it researched experienced growth in 2017.

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On average, these pension funds grew by a healthy 10.5% in 2017. This is the second year in a row of double digit average growth for pension funds following on from 15.7% average growth in 2016.

Sectors of particular note, were UK Smaller Companies, which grew on average by 28.1%, Asia Pacific excluding Japan (24.4% growth), and Emerging Markets (23.2% growth).

‘Welcome news for retirees’

Richard Eagling, head of pensions and investments at Moneyfacts comments: “The latest strong pension fund performance will be welcome news not only to those saving into a defined contribution pension scheme, but also to the growing number of retirees who remain invested in pension funds through income drawdown.

“However, it is important that pension savers and drawdown investors are not lulled into a false sense of security and are prepared for market falls. The fact that the average pension fund has now delivered positive returns in every calendar year since 2012 has arguably made it easier for individuals to accept the investment risks inherent in the defined contribution pension model than might otherwise have been the case.

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“Whether the recent enthusiasm for private pensions and drawdown and the low opt-out rates for auto-enrolment will continue should we see a sustained period of falling investment returns remains to be seen.”

See the table below for average performance of pension funds since 2012. 

Average annual pension fund returns
Calendar year Pension fund growth
2017 10.5%
2016 15.7%
2015 2.6%
2014 5.8%
2013 13.9%
2012 10.8%
2011 -4.6%
2010 13.8%
2009 22.3%

Source: Moneyfacts UK Personal Pension Trends Treasury Report/Lipper data, January 2017.

 

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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