The new pension law (Future of Pensions Act or Wtp) requires pension funds to base investment decisions on their participants’ risk attitudes and capacity to bear risk. Risk capacity reflects the financial situation of a household, in particular, the size and composition of their portfolio of housing wealth, savings, and investments. Measuring risk capacity poses unique challenges to the pension sector because it is likely to vary over time due to decisions by pension participants, such as the buying and selling of risky financial assets, e.g. stocks.

This research will cast light on how households adjust their portfolio in response to economic events by investigating the relationship between key subjective expectations and risks related to income, pensions, and housing on the one hand and ownership of risky assets on the other. Quantifying these relationships is crucial for understanding the heterogeneity in household portfolios, particularly regarding low risk-taking and life-cycle dynamics, and for their implications for wealth distribution and financial market dynamics. The research will provide the pension sector with new insights into the determinants of risk capacity and elucidate how perceived pension risk affects other components of the household portfolio.