Pension & Actuarial Glossary
Authoritative definitions and formulas for the core mathematical concepts used in defined benefit pension valuations.
Net Present Value (NPV)
The current total value of a future stream of pension payments, discounted by a specific expected rate of return.
View Full Term Definition →Discount Rate
The interest rate used in actuarial discounting to calculate the present value of future pension cash flows.
View Full Term Definition →Commuted Value
The lump-sum dollar equivalent that a pension plan sponsor is legally required to pay to settle an individual’s pension obligation.
View Full Term Definition →Actuarial Present Value
A present value calculation that factors in both compound interest discounting and conditional survival probabilities.
View Full Term Definition →Annuity Factor
The present value of a $1 per year annuity over a specified retirement horizon or lifetime.
View Full Term Definition →Mortality Table (Life Table)
A statistical table showing the probability of a person of a given age dying before their next birthday.
View Full Term Definition →Breakeven Age
The exact age at which the cumulative monthly pension payments equal or surpass the value of taking a lump sum buyout.
View Full Term Definition →Cost-of-Living Adjustment (COLA)
An annual periodic percentage increase applied to pension payments to protect purchasing power against inflation.
View Full Term Definition →