Work out pension liability present value instantly with clear inputs, formula shown and shareable results.
A pension promise is a long, indexed stream of payments. Discounting each indexed instalment gives the liability that must sit on the balance sheet, and the Macaulay duration shows how sharply that liability moves when the discount rate changes.
Indexed liability
PV = Σ A(1+g)^(k-1) / (1+r)^k
Figures are estimates for planning only. Rates, mortality and market assumptions change. This is not financial, actuarial or tax advice.
Duration is typically 10-15 years, so a 1-point fall in the rate can raise the liability by more than 10%.
Accounting standards generally require a high-quality corporate bond yield of matching duration rather than an expected asset return.