Fund risk ratings

Why is it important to understand risk?

When it comes to investing your money for retirement, how much risk you’re willing to take for a potential reward is a balance. This is often between how long you have to invest and what you want to get back.

How you choose to invest your money – along with how those investments perform – could have a big impact on the value of your pension pot in the future.

The Scheme offers a range of investment funds for you to choose from. Affecting the level of risk involved, the funds vary in the types of assets they invest in:

bonds
shares
cash
multi-asset

Generally speaking, the higher the risk rating, the higher the expected return over the long term. However, this also means the bigger the expected rises and falls in value will be along the way. On the other hand, lower risk funds may seem like the safe, steady options, however if your investments don't grow over time, inflation could eat into the value of your savings.

Lifestyle strategies invest in a mix of the investment funds listed below but their allocation to each changes over time, moving into lower-risk funds as you near your Target Retirement Age.

Risk and reward - a balance

When choosing your investments, consider how much risk you’re willing to take, given the expected returns, and how long you have until you plan to take your pot.

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Did you know?

All investments can experience rises and falls in value – this is known as ‘volatility’.

High-risk funds

(Global Equity Fund, Long Term Growth Fund, Socially-Responsible Equity Fund)

Investors in high-risk funds can expect to experience sharp rises and falls in value in the short term, but see above average growth over the long term. High-risk funds typically invest in things like shares (equities). This means they are more likely to be affected by changes in the economy and stock markets.

Medium-risk funds

(Corporate Bond Fund, UK Government Fixed-Interest Bond Fund, UK Government Index-Linked Bond Fund)

Investors in medium-risk funds can also expect to experience rises and falls in value in the short term, but to a lesser extent than high-risk funds.

Over the long term, they would generally expect lower returns than those produced by a high-risk fund. Medium-risk funds often invest in bonds, managed in a low-activity way aimed to strengthen and sustain fund value over the medium term.

Low-risk funds

(Deposit Fund)

Investors in low-risk funds should expect low growth over the short and long term. Although that means you’re less likely to experience the extreme highs and lows, low risk doesn’t mean no risk. If you save in a low-risk fund for a long time, there is a high risk that the value of your investments are unlikely to keep up with the cost of living (inflation), which makes them unsuitable for long-term investors.

What's your attitude to risk?

Risk isn’t necessarily bad for you. All funds carry some risk. Your investment choices depend on your attitude to risk - how comfortable you are taking risks with your money. Only you can decide how much risk you're willing to take. To help you understand your own attitude to risk, take a look at our video.

Where to go for advice

We strongly recommend you speak to an Independent Financial Adviser (IFA) before making any decisions about your financial future.

The Scheme’s administrator, Railpen, has appointed Liverpool Victoria (LV) to provide advice to all RPS members. LV will be offering its services at a discounted rate for RPS members. Alternatively, you can also find a list of IFAs in your area at unbiased.co.uk.

You can find more information on the guidance and advice page.

Liverpool Victoria (LV)
0800 023 4187

The chosen partner for financial advice for RPS members.

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What to read next...

My fund choices

Learn more about different investment options available to you as a member of the IWDC Section.

How my investments work

See how the funds you choose can affect the way your IWDC pot grows.

Guidance and advice

Where to find more support about your pension.

I'm here to help.

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Each of Railpen Limited (registered in England and Wales No. 2315380) and Railway Pension Investments Limited (RPIL) (Registered in England and Wales No. 1491097) is a wholly owned subsidiary of Railways Pension Trustee Company Limited (Registered in England and Wales No. 2934539). Registered office for each company: 100 Liverpool Street, London EC2M 2AT. RPIL is authorised and regulated by the Financial Conduct Authority for some of its activities. The administration of occupational pension schemes is not a regulated activity. Full details about the extent of RPIL's authorisation and regulation by the Financial Conduct Authority are available from us on request.