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20 October 2016

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What’s your attitude to risk?

Before making any decisions about which funds to invest in, you need to consider how you feel about taking investment risk.

If you’re in the IWDC Section, or join BRASS or AVC Extra, you’ll be asked which fund(s) you want to invest in.
How your contributions are invested could have a big impact on your pension benefits in the future. Usually, the more you pay into your pension – and the more your investments grow – the better off you’ll be in retirement.
If you don’t make a choice you will be invested in the default fund (known as a ‘Lifestyle strategy’) and your investments will be switched on your behalf following a pre-set strategy.

But, if you’re comfortable managing your own investments, you can instead choose one or more funds from the self-select range.  
Each of the self-select funds has been allocated a ‘risk rating’ between 1 and 7. One is low risk, 7 is high.  
So how do you know what level of risk is right for you?
This short animation from Quietroom explains what attitude to risk is all about: 

Are you willing to take a greater risk knowing the rewards could be bigger, or would you prefer a safer bet and smaller reward? 
Of course, it depends on your needs and circumstances. For instance, with lower-risk funds, you might end up with your funds not being as much as you need. And if you’re a long way from taking your benefits, you might be able to take more risk knowing you have time to take action if any big drops in the market affected you.
But if you’re close to ​taking your benefits, you might want to consider protecting the value of your savings by taking less risk.

High-risk funds – On the plus side, investors in higher-risk funds should expect to see above average growth over the long term; on the minus side, they might see big falls in value in the short term.
Low-risk funds – On the plus side, lower-risk funds are more steady, but they’re less likely to help your benefits grow over the longer term.
Once you understand your attitude to risk, you can think about your aims for your retirement and start choosing.
More information about risk attitude and fund choices can be found in the IWDC, BRASS and AVC Extra sections.
You should consider speaking to an independent financial advisor (IFA) before making decisions about your finances. Visit to find IFAs in your area.

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