Investments are a key part of pensions, both when you are saving for retirement (accumulation) and taking an income from your pension (decumulation).
Attitude to Risk & Capacity for Loss
When taking out an invested product such as Drawdown, your Independent Financial Adviser (IFA) will discuss your attitude to risk, this is your personal approach to risk and how you would like to balance the level of risk against an increased potential for growth.
Alongside attitude to risk, your IFA will also establish how much in a worst-case scenario can you afford to lose without having a detrimental impact on your ability to maintain your financial commitments and lifestyle. This figure is known as your capacity for loss.
Your IFA will use both your attitude to risk and capacity for loss when making their recommendation and where an investment is recommended to ensure the selected investments are appropriate.