The real rate of return of UK pension funds, which is calculated to take inflation into account, averaged 7% for UK pension funds during 2006, 10% less than the average real rate of return generated in 2005 according to a new report.

International Financial Services London, a firm which promotes the UK financial services industry internationally, said the real rates of return averaged 14% in 2003, 8% in 2004, 17% in 2005 and 7% in 2006. The average between 1997 and 2006 was 5.1% a year.