Risk labeling of market interest rate products
Risk is necessary in order to get a return
AP Pension invests your savings in securities, e.g. bonds, shares, real estate, etc. We do this to make your savings grow so that you can maximize your retirement income. Investment in securities may see the value of your savings fluctuate up and down from year to year. This is called investment risk.
See the risk for your pension savings
To make it easier for you to understand and compare the risk for your pension savings, all pension products are “labeled” with a risk ratio between 1.0 and 6.0:
Risk figures between 5.0 and 6.0 represent the highest risk. Here, your savings may fluctuate significantly up and down from one year to the next.
Risk figures between 1.0 and 1.9 represent the lowest risk. There will be fewer fluctuations here.
See Insurance and Pension Denmark's estimate of how much savings can increase over the course of a year here. You can compare the risk of your own scheme with similar products from other companies at faktaompension.dk/risiko
Short-term and long-term risk
There are two types of risk when it comes to pension savings. Short-term risk, which shows how much the value of your savings can fluctuate up and down from one year to the next. And long-term risk, which shows how uncertain your future payouts are when you retire.
The risk figure is only an expression of the short-term risk – i.e. how much the value of your savings may increase or decrease from one year to the next.
Risk depends on your age
When the risk is high, the chance of return is also high. AP Pension has therefore developed a pension product, AP Active, where the risk is high when the customer is young. When you are young, time and future payments can recover any losses in the years when there are negative developments in the financial markets. When you get older, you don't have as much time to recover any losses and future payments cannot compensate to the same extent. Therefore, AP Pension gradually reduces the risk as the customer gets older. For example, the individual funds in this product are called AP Active 2044, where 2044 represents the year in which the pension scheme is paid out.
AP Pension also has a number of other pension funds that customers can choose to invest in, where the risk is not adapted according to the customer’s age. When investing in these funds, e.g. AP Invest Danske Aktier, the investment is managed with the aim of achieving the best possible return in the same way for all customers, regardless of age.