Fair (actuarial) value meaning

In legal and pensions practice, fair (actuarial) value describes the actuarially determined present value of future pension benefit cashflows at a given valuation date, calculated by discounting projected payments using appropriate actuarial assumptions (for example, discount rate, inflation, mortality and salary growth). Also called the actuarial present value, it is a descriptive term rather than a definition set by statute or case law; the basis adopted varies by context, including scheme funding (technical provisions under the Pensions Act 2004 and The Pensions Regulator’s funding code), corporate accounting (IAS 19/FRS 102), transfer values, bulk annuity buy‑out/buy‑in pricing and employer debt calculations (section 75). Its practical significance is that it provides a figure for defined benefit liabilities to inform contribution setting, covenant assessments and corporate transactions. Assumptions should be reasonable, transparent and purpose‑specific; small changes in the discount rate or longevity can materially alter the value. Usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, though the detailed funding standards and regulatory guidance differ and relevant domestic pensions legislation and regulator’s guidance should be considered. Not to be confused with “fair value” of assets under IFRS 13, which is an exit‑price measurement distinct from actuarial liability valuation.