Personal pension funds in the UK have seen six consecutive years of positive growth, with 2017 seeing average returns of 10.5 per cent, according to a report by Moneyfacts.

It is the second year running that pension funds have seen double-digit growth, with 2016 seeing returns of 15.7 per cent. The last time pension funds saw negative returns was in 2011 with -4.6 per cent.

Of all the pension funds surveyed, the vast majority (95 per cent) delivered positive growth during 2017. In terms of the best-performing ABI pension fund sectors, UK Smaller Companies (+28.1 per cent), Asia Pacific excluding Japan (+24.4 per cent) and Global Emerging Markets (+23.2 per cent) led the way.

In addition, Monefacts said the report highlights how the two most important initiatives that are currently shaping private pension provision - auto-enrolment and pension freedoms - have been operating within an environment of positive pension fund returns, something that has helped them to gain traction.

Since auto-enrolment was introduced in 2012 the average pension fund has delivered growth of 65 per cent, and has risen by 24 per cent since pension freedoms began in 2015.

Commenting, Moneyfacts head of pensions and investments Richard Eagling said: “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 DC pension model than might otherwise have been the case.

"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.”

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