Pensions are a form of long-term savings for retirement. There are different types of pensions, including the State Pension, workplace pensions, and private pensions. A person may be a member of multiple pension schemes and have multiple pension pots, each representing the total contributions made to a particular scheme.

The contributions made to a workplace or private pension form the “pension pot,” which is invested with the aim of growing its value over time. There are various investment options available, ranging from low-risk options like cash and bonds to high-risk options like stocks and shares. The choice of investment will depend on the level of risk the individual or the pension scheme trustees are willing to take.

The attitude to risk of an individual is a crucial factor in determining the investment strategy for their pension pot. A psychometric test is used to assess an individual’s risk tolerance and inform the investment recommendations made by an adviser. The capacity for loss is another important factor, as it indicates how a person's lifestyle would be affected in the event of a loss of investment.

It is important to remember that no investment is guaranteed and that investments can both increase and decrease in value. When considering the risk involved in a pension investment, one should also take into account their capacity for loss and overall financial situation.