In the investment profiles in PFA Plus, the risk is gradually reduced as retirement approaches. This is illustrated in the figure and table, which show the risk value of the four profiles depending on the number of years until retirement. In terms of risk, CustomerCapital is placed with 5 % in Global Equity. Read more about CustomerCapital and see your exact share of CustomerCapital at My PFA.
Risk values between 5.0 and 5.9 represent the highest risk. Here, your savings may fluctuate significantly from one year to the next.
Risk values between 1.0 and 1.9 represent the lowest risk. Here, fluctuations will generally be less pronounced.
Once you have found the risk value, you can see here
how much the savings may fluctuate throughout a year (link to Insurance & Pension Denmark's website, in Danish only).
Please find the method description at Insurance & Pension Denmark's website
(in Danish only)
Profile risk classification
Based on Insurance & Pension Denmark’s risk bands, the profiles are risk classified with these classifications:
Profile A: Low risk
Profile B: Low risk
Profile C: Medium risk
Profile D: High risk
Deviations from Insurance & Pension Denmark’s recommendation
The upper and lower limits of how high or low the short-term investment risk can be for an investment profile to be categorised as “Medium risk” is fixed by Insurance & Pension Denmark (IPD).
As of 1stJuly PFA’s profiles deviate from the recommendations when it comes to:
PFA Plus Profile B with 14 and 13 years until retirement in 2020 has a risk value of 2.9, which is 0.1 higher than Insurance & Pension Denmark’s upper limit of 2.8. From one year to 5 years after retirement, the risk value is 1.7, which is 0.1 higher than Insurance & Pension Denmark’s upper limit of 1.6 1 & 2 years after retirement and 0.2 higher for 3-5 years, where the limit is 1.5.
PFA Plus Profile C with 15 and 14 years until retirement in 2020 has a risk value of 4.0, which is 0.1 higher than Insurance & Pension Denmark’s upper limit of 3.9.
PFA Plus Profile D with 4 years until retirement in 2020 has a risk value of 2.7, which is 0.1 lower than Insurance & Pension Denmark’s lower limit of 2.8 for high risk. With 3 years until retirement the risk value is 2.6, which is 0.1 lower than the lower limit. With 2 years and 1 year until retirement the risk value is 2.5, which is 0.1 lower than the lower limit.
PFA’s investment profiles observes the limits of all other investment horizons.
Short-term and long-term risk
Pension savings entail two types of risk. The short-term risk illustrates how much the value of your savings may fluctuate during the next year. And the long-term risk illustrates the level of uncertainty related to your future payouts when you retire.
The risk value is only an expression of the short-term risk – i.e. how much the value of your savings may fluctuate during the next year.
The risk depends on your age
When the risk is high, the return expectations are also high. Therefore, most pension plans entail a high risk while the customer is young. While the customer is young, there is time to regain any losses sustained during years with negative developments on the financial markets.
When the customer gets older, there is less time to regain any losses sustained. Thus, most pension plans gradually reduce the risk as the customer gets older.