Actuarial Assumptions*

An actuarial assumption is an estimate of an uncertain variable input into a financial model, normally for the purposes of calculating benefits. For example, a common actuarial assumption relates to predicting a person’s lifespan, given their age, gender, health conditions and other factors.

Further explanation: In the context of pensions, actuarial assumptions are used to estimate the cost of funding a defined benefit pension plan. Assumptions include: mortality rates, the rate of return on investments, the rate of inflation, and the rates at which plan participants might leave the system due to termination, disability, retirement, etc.

Definition courtesy of Investopedia

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