Choice of pension profile and mutual fund

A pension profile can consist of different proportions of shares and fixed-income securities, and it is important that you choose what is best for you.

When choosing a pension profile, it’s important to evaluate the proportion of equities. You should think about how much risk you want to take, your expectation of return and how many years it is until you retire. If you still have many years left, you are less exposed to fluctuations in the market as the risk of a high proportion of equities is distributed over a longer period of time. Experience tells us that the market overall will rise in the long run. Historically, stocks have provided a better return than fixed income securities, but also higher risk. Note that historical returns are no guarantee of future returns.

• Good diversification of investments, divided into several mutual funds and asset classes
• Automatic rebalancing; we adjust investments so that the composition of pension profiles is kept constant
• Downweighting – the risk is gradually reduced when you approach retirement age. You can also choose to turn off or change when the downweighting should start
• Flexibility – you can change risk profile or management style if your needs change

In DNB, we offer three different types of pension profiles, where the difference is mainly the management style of the underlying mutual funds.

Active management “Our experts select the companies they think provide the best return. Investing in markets such as high-earning bonds and commercial property

Index management - passive management at low costs.

Green shift - investments with a clear sustainability theme, and with a particular focus on climate and the environment.

Reduced risk towards retirement age

For those with a pension profile, the proportion of shares is automatically reduced every quarter as you approach retirement age. This is called down-weighting. The money is thus less exposed to fluctuations in the market.

If you have chosen a fund yourself, you get no automatic reduction of risk in your pension savings. If you want automatic down-weighting, you can change to a pension profile. Changing funds in your portfolio can also contribute to risk reduction.

Down-weighting

Down-weighting means reducing the risk in your savings as you approach retirement age. You start with a higher proportion of equities at a young age, and when you get older you get less shares and more fixed-income securities. This is how to avoid having too high a risk in your savings as you approach retirement age.

If you have switched off down-weighting on your pension profile, you can switch it back on at any time in the online bank and in The Spare app under:

• Pension - Pension account/Pensjonskonto Flex
• My investment options
• Change down-weighting - Adjust down-weighting

What should you think about when choosing a mutual fund?

When you are saving for a pension, you must think about how long it is until you have to withdraw your pension when choosing a mutual fund. Different types of mutual funds have different risks and recommended time horizons for saving.

There are three main types of mutual funds: equity funds, fixed-income funds and balanced funds. Which type of mutual fund is right for you depends, in particular, on the desired risk and time horizon. The longer you save, the greater the chances of getting a good return.

Equity fund is a mutual fund where at least 80 per cent of your money is invested in equities. The value of an equity fund will fluctuate, and we therefore recommend a savings period of at least six years.

Balanced fund is a combination of equity fund and fixed-income fund. The recommended savings period depends on which balanced fund you choose. Read more about the Active Funds.

Fixed-income fund is a mutual fund where your money is invested in fixed-income securities such as bonds and commercial papers. You can consider saving in fixed-income funds if you want a higher return than a bank account and have a savings horizon of 2 years or more.

Historical returns are no guarantee of future returns. Future returns will depend, among other things, on market developments, the skill of the Portfolio Manager, the mutual fund’s risk, and the management costs. Returns may be negative as a result of mark-to-market losses.