Default master trust savers close to retirement have seen their pension savings fall by an average of 8.7 per cent during the first quarter of 2020, according to new research from Isio.

The firm’s report, DC default review: Weathering the storm, also revealed that members at the start of their careers, who still have around 30 years until retirement, have seen their pension savings fall by between 13.2 and 20.8 per cent in the past three months.

Isio stipulated that these younger members are in the growth phase of the sample defined contribution master trust default strategies, and therefore had a heavier exposure to equity-driven strategies.

The firm emphasised that these strategies in particular have been worst hit by the recent market sell-off, clarifying however, that regional allocations and currency had an impact on performance for providers with similar equity exposures.

It also added that exposure to listed alternatives had also hurt performance given "their higher correlation with equity markets".

Meanwhile, late-career members, those with two years until retirement, have been better protected from market volatility throughout the first quarter.

Isio clarified that investments for this subset of members would be in defensive strategies with higher allocations to gilts, therefore offering them downside protection.

Commenting on the findings, Isio head of DC investments, Mark Powley, said: “By the end of 2019, financial markets had experienced several years of positive returns.

"However, the impact of Covid-19 in the first quarter has tipped markets over the edge, wreaking havoc across risk-based assets with volatility at its highest since 2008.

“Although younger members have been more affected by market volatility, for these members future contributions will be the main driver behind their pot size in the future.

"We would therefore encourage these investors to be patient and take more of a long-term approach to assessing success or failure in the growth phase.

“On the flipside, recent sell-offs have illustrated the need to diversify in the right way and dial down risk as members approach retirement. Getting this right has a massive impact on members’ retirement outcomes and chasing returns could result in disaster.”

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