This is the second year in a row that average pension funds have produced double-digit growth, according to Moneyfacts data.

In fact, four out of the last six calendar years have produced double-digit growth.

The vast majority (95%) of pension and drawdown funds delivered positive growth during 2017 with the UK Smaller Companies returning 28.1%, Asia Pacific excluding Japan returning 24.4% while Global Emerging Markets returned 23.2%.

It notes that auto-enrolment and pension freedoms have impacted private pension provision. Since auto-enrolment was introduced in 2012, the average pension fund has delivered growth of 65%, rising 24% since pension freedoms began in 2015.

Richard Eagling, head of pensions and investments at Moneyfacts, said: “It’s important pension savers and drawdown investors are not lulled into a false sense of security and are prepared for market falls. The fact 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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Ian Browne, pensions expert at Old Mutual Wealth says the report has produced encouraging figures but agreed that further challenges will be faced if markets fall.

“While the report suggests these returns have fuelled a recent enthusiasm for pensions and drawdown, numbers from the ONS show only 20% of people believe workplace pensions are the best way to maximise returns. There is a risk that it will decline even further if markets fall and returns are less generous.”

Browne added that already over half of retirees are taking their retirement savings and investing in something else, like an ISA, cash, buy-to-let or fixed-term deposit, which can have disastrous long-term consequences.

“There is a serious need for accessible financial advice so that people understand the strengths of modern pension products. Pensions offer competitive charges, a range of investment options, liquid investments that can be easily sold to produce income, and come with the protection of the Financial Services Compensation Scheme.

“All of these attributes will be even more necessary if there is a market downturn and so consumers need to ensure they are seeking financial advice so they can be guided through the complex work of retirement products and financial markets.”