The first of the ‘Generation Freedom’ retirees taking advantage of the new pension flexibilities in April last year have faced a 12% fall in the FTSE 100 and “paltry returns on cash deposits”, according to Aegon.

Someone investing in a fund with a risk rating of 4, a relatively equal investment mix of bonds, domestic and overseas equities and some property, would have seen their fund value fall by 1.8% over the past 12 months, the firm calculated.

Research from eValue commissioned by Aegon suggested volatile markets could have wiped up to two years of retirement income off the savings pots of those entering drawdown in April 2015. If market conditions were to continue on this trajectory, five years of volatility could become "a decade of lost income", researchers said.

Barry Cudmore, Aegon’s guarantee solutions spokesperson, said: “It’s absolutely vital that people have a grasp of the impact that the markets can have on retirees’ income levels and their chances of running out of income later in life.

“Education is key. Advisers have a really important role to play in helping people understand their options at retirement whether they choose drawdown or a guaranteed option. For those who want flexibility and to keep their money invested but don’t want to be exposed to the downside risks of market exposure, there are solutions available that lessen the need for constant income adjustments.

“Income solutions that are guaranteed leave people less exposed to market fluctuations and can provide both income guarantees and access to cash when needed. For advisers, this means turning negative conversations about reducing sustainable income levels, into positive conversations about income preservation and even locked in gains.”