Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Saving for a comfortable retirement can seem daunting and the past few months have not been too kind on annuity income. A third (36%) of pension funds fell during Q3 2021, which is why consumers would be wise to keep a close eye on where they have their money invested. Those who saved £100 gross per month for 20 years into a personal pension would have built a pot of £53,157 on average, and taking a standard annuity at age 65 would result in a yearly income of £2,200.

“The majority of pension fund sectors are still offering positive returns, but there has been a notable shift compared to Q2 2021, when 91% of pension funds returned growth compared to 64% in Q3 2021. The average pension returned less than 1%, at 0.45% during Q3 2021 compared to 4.1% during Q2 2021. Compared to the equivalent quarter a year ago (Q3), fund returns have worsened slightly in 2021, but it is worth remembering that 2020 overall was hit hard by the impact of the Coronavirus pandemic. The volatility to fund sectors makes it ever-more prudent for consumers to monitor where their cash is invested, but it is also important that they seek advice to ensure they don’t switch their funds in haste.

“In positive news, recent research has revealed some consumers have taken steps to save more for their retirement. A change of mindset could well have developed for these consumers if they were impacted financially by the pandemic and felt they need to make more provisions for their future. A recent study from Scottish Widows revealed the same proportion of men and women are now saving enough for a comfortable retirement (61%) for the first time on record. This is a huge step in the right direction, and hopefully this momentum continues for the foreseeable future and isn’t just a temporary change.

“Consumers concerned with a pensions shortfall in retirement may be wise to consider alternative ways to boost their income, perhaps with rental income from investing in property through buy-to-let or releasing equity out of their home by equity release. However, both areas require careful consideration and getting independent advice before committing to any arrangement is wise.”