£50,000 or a coin flip for £1 million? What your choice tells you about your attitude to risk

Would you take £50,000 or flip a coin for a chance to win £1 million?

That’s the question that exploded on social media in July, with BBC News even picking it up.

You’ll probably never be given this opportunity. But if you were, the data suggests that you’d choose the £50,000.

In a YouGov poll of just over 4,500 adults in Great Britain: 

• 73% said they’d take the £50,000 instantly;
• 21% said they’d take the 50/50 shot on the £1 million; and
• 6% said they didn’t know either way.

There’s no right or wrong answer - it completely depends on your preferences and circumstances.

But your answer can offer a valuable insight into yourself, and how you feel about risk.

Here’s why.

Risk can equal reward, but also loss

Your answer to this question speaks to how you think and feel about risk.

Generally, the more risk you take, the higher the potential reward. But of course, the higher the chance of losing, too.

In this case, that’s true. There’s no risk to taking the £50,000. But you take on 50/50 odds - and risk as a result - if you opt for the coin flip.

So, it’s a question of how risk-averse you are as an individual. 

If you’re not very risk-averse and willing to accept a chance of loss, you’re more likely to go for the £1 million.

But if you’re highly risk-averse, you’ll probably pick the certainty of the £50,000.

The YouGov survey results therefore suggest that, as a nation, Brits are highly risk-averse. And that translates into the decisions we make with our money. 

That’s exactly what a Financial Conduct Authority (FCA) survey shows. It found that we much prefer holding money in cash, where there’s no chance of losses, than investments, where there’s greater growth potential but also risk of losing value.

The most recent data shows that nine in 10 adults held cash savings, yet just 35% had investments.

This risk aversion could stem from a psychological bias called ‘loss aversion’. A theory developed in 1979, loss aversion means that we feel the sting of a loss twice as much as the pleasure of a win.

It’s an evolutionary mechanism that helped ensure our survival as a species. For our ancestors, going for an extra piece of fruit in the tree when they’d already gathered enough could’ve led them to fall and hurt themselves unnecessarily. 

Being loss-averse meant being risk-averse, keeping us safe from danger. 

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Taking risk can give you opportunities to grow your wealth

Avoiding risk and loss sounds sensible, and in many respects, it is.

However, there’s also a possible downside: you could miss out on opportunities by not taking risk.

In this hypothetical case, the opportunity cost of not taking the coin flip is quite stark. You could be leaving £950,000 on the table. Of course, to go for it, you’ll have to be comfortable with the chance that you’ll walk away with nothing.

Investments carry a similar opportunity cost. As we saw above, far more people save than invest in the UK. Yet, investing gives them a greater potential for growing their wealth.

Barclays produces an annual study comparing cash with investments in equities (that’s stocks and shares) and gilts (that’s UK government bonds).

The latest data shows that, between 2004 and 2024, cash declined in real-terms value by 40.5%. 

That’s because inflation - that’s the rising cost of living - reduces your money’s spending power. Over time, you can’t afford to buy as much because prices have risen faster than the value of your money.

Whereas an investment portfolio made of 60% equities and 40% gilts returned 21.6% in real terms. 

Of course, there’ll have been ups and downs along the way. All investments involve an element of risk, and there’s always the chance that you’d get back less than you invest. 

Past performance doesn’t necessarily tell us what’ll happen in future, but, over long periods, investments tend to outperform cash. Not taking on risk could reduce your wealth’s growth potential - or even see it lose its spending power over time.

Working out your personal risk tolerance can help you make the right decisions for you

This goes to show that it’s important to develop a healthy, manageable relationship with risk. That way, you can take on an appropriate amount that’s right for you, without either taking on too much, or missing out on opportunities to grow your wealth. 

To do this, it’s worth thinking about your personal risk tolerance in the full context of you and your money. Here are three things to consider.

• Capacity for risk - that’s how much you could realistically afford to lose when taking risk. In the specific decision of whether to flip the coin, capacity’s less important as you aren’t staking any of your own money. But it applies in the sense that if you couldn’t afford to live without the £50,000, it wouldn’t be sensible to go for the £1 million.
• Need for risk - in other words, what return would you need to achieve your financial goals? If you wanted to retire imminently and £50,000 would top up your fund to provide the lifestyle you want, there’d be no need to flip the coin. 
• Attitude towards risk - this covers your individual feelings. Simply, can you handle taking risk? Would the stress of the coin flip be worth it when you could walk away with £50,000 now?

Your pension’s invested for your future

When you save into a pension, that money's invested for the long term - often for decades.

Your pension will usually invest in a range of assets (like stocks, bonds and cash) collectively known as a ‘fund’ or ‘plan’.

PensionBee offers a range of curated pension plans for different saving needs. You can stick with one of our default plans - that’s the Global Leaders Plan for under 50s, or the 4Plus Plan for customers aged 50 and over.

Or, choose one of our specialist plans, such as the Climate Plan or the Shariah Plan.

As each plan holds different investments, their risk/reward profiles vary. Scroll down on the plan page for more information on the risk level of your plan.

Remember, the younger you are, the more time you have to ride out market volatility over time before you can access your pot (from 55, rising to 57 from 2028). 

That’s why our default plan for under 50s has a higher risk/reward profile. Meanwhile, the default over 50s plan’s a medium profile.

Armed with this knowledge, you can pick a plan that’s suitable for you and your circumstances.

In the meantime, now that you’ve thought about your risk tolerance, are you flipping the coin?

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. Past performance isn't a guide to future performance. This information should not be regarded as financial advice.