The fall in the value of the FTSE over the past several months could have a “serious” impact on the pensions of those close to retirement, according to Hargreaves Lansdown.

Since 27 April 2015, the FTSE has dropped 20.1 per cent and the average mixed asset pension fund has fallen 9.4 per cent. However, over the same period annuity rates have increased by 1.6 per cent.

Hargreaves Lansdown head of retirement policy Tom McPhail has highlighted that the fall in the FTSE serves as a reminder about how important it is for people to take responsibility of their own retirement.

“Those who are still some way from retirement should not panic, this is part and parcel of stock market investing and they will have time on their side to recover losses. For those close to retirement, or drawing their pension the recent drop could be more serious,” he warned.

For example, a 20 per cent fall in the value a pension close to retirement could “wreck your best laid plans,” McPhail said.

As an example, a 65 year old with £50,000 in their pension at the end of April 2015 could have bought an annual annuity income of £2,739. Despite an increase in annuity rates, a 65 year old today could only buy an annual income of £2,306.

However, he cautioned that those who have suffered large falls need to be careful not to panic sell as this could lock in any losses. Instead, he advised people monitor their pension and gradually de-risk.

“Those not solely invested in the FTSE 100 may have fared rather better. The average mixed asset pension fund has fallen 9.4 per cent over the time the FTSE 100 has dropped by 20.1 per cent Whilst still eye watering, it shows how important it is to have a diversified investment in your pension,” he noted.

In addition, McPhail said those who have opted to remain invested and draw an income throughout retirement “could be destined for their pension pot to run out quicker than anticipated”. This is because stripping away at the capital in your pension compounds any falls in value of a spluttering stock market.

“Investors looking to use income drawdown should ensure they are not totally reliant on this pot by having sources of secure income (state pension, annuity, final salary pension). Choosing to draw only the income produced by the pension investments (the natural yield), rather than stripping away at capital, helps preserve the pension pot over the longer term,” he added.

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