Millions of people could see the value of their pensions slashed by up to 20 per cent because of new EU rules.

Those with a £100,000 pension fund could be more than £1,100 per year worse off in retirement because of the reforms, research has shown.

The Solvency II rules, which are due to come into effect in January 2014, will force pension funds to hold a higher proportion of ‘safe’ Government bonds.

As the bonds – called gilts – have such low rates of return it will drive down the returns on retirement fund annuities, which are used to pension income.

The reforms are designed to make pension funds safer and reduce the risk of them going bust.