Despite the financial turmoil in 2020 due to the coronavirus pandemic, average annual pension funds saw 4.9% growth. However, this was down from the 14.4% recorded in 2019, but a more positive picture than the -6.2% witnessed in 2018.

Meanwhile, data from Moneyfacts revealed that the average annual annuity income fell 6.3%, after already recording -8.5% in 2019. Retirees also saw -0.2% in 2018, meaning this is the third consecutive year of annuity income falls.

Rachel Springall, finance expert at Moneyfacts, said for those approaching retirement, they may find they have a shortfall due to market turmoil and that their cash savings are earning little interest with rates falling to all-time lows.

“Indeed, in light of the coronavirus pandemic, some people may have made the decision to dip into their pot using pension freedoms or plan to do so soon. Billions of pounds were taken out of pensions during Q3 2020 according to HMRC and this money could have been drawn for more immediate financial issues or even to help a family member during challenging times. Some may also consider equity release to fill the retirement gap, however, it’s always wise to seek advice before committing to any arrangement,” she said.

Springall added that for those disappointed by the average fall in annual annuity income, they may be more inclined to opt for pension drawdown instead.

She said: “Since pension freedoms were introduced in 2015, annuity income has fallen for five out of the six years. Growth has not been seen across the market for a one full year since 2017, which was just 1%.

“Clearly it would be wise for consumers to seek independent financial advice when it comes to their retirement plans and keep up with regular reviews of their investments and options. A workplace pension may not be sufficient to meet someone’s retirement goals and if unchecked too late, it could delay their retirement plans or force them to seek other ways to plug the gap.”