Since the introduction of the landmark pension freedoms in April 2015, which effectively removed the requirement to buy an annuity, drawdown has become a popular strategy for retirees.

Pension provider Aegon reported drawdown growing from 15% of retirement income sales in Q3 2013 to 46% by Q3 2016.

And its figures revealed drawdown pensioners are opting for the reduced investment risk associated with multi-asset funds with the money which is left invested within their pension pot.

Nearly half of Aegon’s drawdown customers were into multi-asset strategies (45%), while equity growth came in second place (18%), 15% into bonds and equity income came fourth at 12%.

Further, Aegon noted investors are replacing some equity growth with equity income, and Neil Woodford’s fund is dominating the cash flow figures in the equity income sector.

However, while these drawdown investors have experienced broadly positive markets in the two years since the new pension rules were introduced, it warned that a significant market shock could wipe years off retirement income unless investment strategies are de-risked.

Nick Dixon, investment director at Aegon, said: “What’s changed post-pension freedoms is the number of people who keep their pension invested and accept a degree of investment risk in the hope of an improved return on their savings. A few years ago the vast majority of people opted for an annuity purchase on retirement, while now nearly half opt for drawdown.

“Generally Aegon’s drawdown investors take less investment risk than non-drawdown investors. Most Aegon drawdown investors use multi-asset funds, and the risk profile of their investment tends to be cautious. We also notice a slight increase in bond and cash investments over equities in retirement. And within equities, a larger number choose equity income funds – which offer the prospect of steady dividends from large, well-established firms – in retirement.

“By staying invested, individuals have the potential to see the value of the companies they’re invested in grow over time, so there’s potential for both capital appreciation and income. Of course these funds carry an element of investment risk which isn’t a factor in an annuity purchase, as their value will be determined by the performance of the companies in which they’re invested and dividends can’t be guaranteed.”

Dixon added that for those opting for drawdown, it means savers need to decide where to invest their money, how much risk to take and whether they need to adjust the income they’re taking based on the performance of their investments.

“These are complex decisions and those who aren’t sure what to do should seek advice,” he said.