What are your risk levels?
Updated 01 August 2023
Retireready uses five risk levels, ranging between 1 and 5. These help to provide an indication of the potential level of risk and reward for each fund. Level 1 is considered to be the least risky whereas Level 5 is considered to be the most. To find out what these levels mean, click on the Risk levels 1 to 5 below.
It can be difficult to decide the level of risk you may wish to take. Our risk assessment questionnaire is designed to help assess your attitude to risk. The risk levels shown shouldn't be taken as guidance or advice on which fund to select as this will depend on lots of things including:
- how long you have to save
- the lifestyle you want in retirement
- your personal circumstances
- any other financial commitments you have, such as repaying debt
The value of an investment can fall as well as rise and isn't guaranteed. You may get less back than you invest. There is no guarantee that the fund objective will be met. You should speak to your financial adviser, if you have one, about your options before making any decisions. If you don’t have a financial adviser, you can visit MoneyHelper to find the right one for you.
Some Retiready investors, for instance those who’ve upgraded to Retiready or who are members of a workplace retirement savings scheme, may see factsheets using different risk ratings, ranging from minimal to Higher risk. To find out what these risk ratings mean click on the ‘Minimal to higher risk levels’ box below.
Please note, you shouldn’t compare Aegon and Retiready risk scales or fund risk levels to each other, or to those of other companies. This is because they may be based on different criteria.
Risk level 1
Your main worry is losing money. You prefer to see slow, yet steady, growth with not too many losses, even if inflation reduces the spending power of your savings over time.
Risk level 2
You are concerned about losing money but realise you may have to take some risks with your savings to stay ahead of rising prices.
Risk level 3
You take a balanced view of risk and are prepared to take risks with your savings in the hope that long-term returns will outstrip any short-term losses.
Risk level 4
You are less concerned about losing money (even if it’s quite a bit) in the short term than giving your savings the best chance to grow over the long term.
Risk level 5
You’re willing to take significant investment risk and prioritise growing your savings over protecting your capital. You’re prepared to weather large falls in the value of your savings over the short term in return for giving them the best possible chance to grow over the long term.
These funds will typically have underlying investments that we’d expect to experience little change in value from day-to-day. The fund price movements will generally go up but could also go down, particularly in a low interest rate or inflationary environment. They’re particularly suited to short-term investment where stability is the main aim. Over the longer term, they’re unlikely to deliver high levels of return and returns may not keep pace with inflation.
These funds will typically have underlying investments that we’d expect to experience small changes in value from day-to-day. The fund price movements will generally go up but could also go down, particularly in a low interest rate or inflationary environment. Funds with a low risk rating may keep risk down in a variety of ways, for example by holding a very broad range of investments, or they may contain a narrower range of fixed interest or cash investments with a short term to maturity. Over the longer term, they’re unlikely to deliver high levels of return and may not keep pace with inflation.
These funds will generally see some change in day-to-day value, both up and down, and these changes will typically be larger than those of a cash deposit. They may hold a broad range of investment types, including equities (shares), but a significant proportion may also be invested in investments that aim to provide a reliable source of income (like government and corporate bonds) and, with that, greater stability than would typically be available from equities. They try to provide better long-term growth prospects than a cash deposit, but are lower risk than funds investing largely in equities.
These funds will generally invest in a broad range of investment types and will typically hold a significant proportion in equities (shares). Their daily price movements will therefore vary from day-to- day, both up and down, although not usually as much as for funds investing entirely in equities. These movements can lead to lengthy periods where their value goes down depending on market conditions. However, over the longer term these funds would be expected to deliver significantly better growth prospects than a cash deposit.
These funds typically invest in one single investment type or geographical region, for example regional equities (shares) or global bonds. This means that investors are completely exposed to the performance of that single investment type or region. These funds could experience lengthy periods where their value goes down depending on market conditions. However, these funds can also rise in value quite significantly and have historically provided good long-term growth. Because of their narrow investment focus, they’re better suited to investors with at least five years to invest and to use in combination with other funds as part of a diversified portfolio.
These funds typically invest in regions and investment types that can experience large day-to-day changes in value, both up and down. They tend to invest in a single investment type or geographical region and these investment types (for example funds investing in commodity companies) and regions (for example emerging markets equities) have historically been more volatile (risky) than those in the ‘Above-average risk’ category. These funds could experience lengthy periods where their value goes down depending on market conditions. However, these funds can also rise in value quite significantly and have historically provided good long-term growth. Because of their narrow investment focus, they’re better suited to investors with at least five years to invest and to use in combination with other funds as part of a diversified portfolio.