Investing your DC account
DC Start and DC Core
As a member of DC Start or DC Core, you have an individual account, which is invested with the aim of growing its value (through investment returns).
In DC Start, your account is automatically invested in the Lifetime Pathway fund, so you don’t have any investment decisions to make. The money from your account goes into the Lifetime Pathway and we assume that you will save until your state pension age. You can read more about the Lifetime Pathway in 'Your Choices'.
In DC Core, you can choose how your account is invested.
DB Core and DB CorePlus
If you are a member of DB Core or DB CorePlus and you:
- earn more than £47,427 (the pensionable earnings cap); or
- pay additional voluntary contributions (AVCs)
You will also have a DC Core account, and you can choose how you want to invest your savings.
Risk and reward
Your attitude to risk is important when deciding how to invest your DC Core account.
Usually the higher the risk, the more you can potentially get back from your investments. But, as the name suggests, with higher-risk investments you are also more likely to lose out, especially in the short term. Lower-risk investments usually give more predictable returns. However, over the long term these are likely to be lower than returns from higher-risk investments.
There are different types of investment risk, which include:
- the risk that your investments will go down in value, or not do as well as expected;
- the risk that any overseas investments will lose value due to the currency they are held in. For example, if the pound gets stronger against the euro, European investments will lose value to a UK investor;
- the risk that your investment returns will lose value in ‘real terms’. This means that they grow less than inflation does; and
- the risk that the return on your investments will be lower than the cost of managing them. This cost is often referred to as the annual management charge.
Your age and how close you are to retirement could also affect your attitude to risk.
If retirement is quite far away, you may be happy to accept a higher level of risk in the hope of higher investment returns in the longer term, as you’ll have time to wait for markets to recover if the value of your investment falls.
If you’re nearer to retirement, you may want to protect the value of your account, rather than trying to grow it, so lower-risk funds might be better for you.
If you want advice about your investment choices, you should contact an independent financial adviser. The Money Advice Service has a list of advisers who are authorised by the Financial Conduct Authority and can be found at: www.moneyadviceservice.org.uk.