Pension funds are generating more returns than most Britons expect, according to new research which suggests many savers underestimate how much cash their pension can generate.

Industry data shows that leading pension funds have brought average annual returns of 7.72% over the last five years for people who are 30 years away from retirement.

The same researchers found in a previous survey that over a third of savers aged 18 to 54 only anticipate returns between 5% and 7%.

The strongest performing funds all surpassed 8% in average returns over the five-year period for younger savers, and were offered by Aviva, Nest and PensionBee, the company which carried out the research.

Meanwhile, for people who are closer to retirement, pensions were more closely aligned with expectations, with average returns of 5.25% for people who were five years from the state pension age of 66.

The survey found 37% of people 55 and over believe a realistic return is between 5% and 7%.

Clare Reilly, chief engagement officer at PensionBee, said: “These results demonstrate the importance of long-term planning and investment in pension funds.

“The average fund performance exceeding saver expectations shows that with a well-planned strategy, pensions can deliver strong returns over time.

“The findings underline the value of continued engagement with pension plans, as well as the importance of selecting a provider that offers flexibility in investment strategy based on individual timelines and risk profiles.

“We encourage savers to remain focused on their long-term goals and make the most of growth opportunities while they’re still accumulating savings in order to have a happy retirement.”

It comes after separate research earlier in September which found that women are more likely than men to be holding their long-term nest eggs in a savings account instead of an Isa or pension.

Nearly half (46%) of women are holding money intended for the long term in a savings account, instead of a pension or Isa, compared with 39% of men, according to Scottish Friendly’s Family Finance Tracker.

Long-term savings were defined as thinking longer than five years ahead, such as saving for retirement, a deposit on a property or starting a business.

The research was commissioned by Scottish Friendly alongside the Centre for Economics and Business Research, and the study was carried out among 2,600 people across the UK.

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