How does discount rate affect pension liability?

Pension liabilities are highly duration-sensitive (duration 15-20 years). A 1% increase in the discount rate reduces PBO by 15-20%. This is why pension deficits fell sharply when interest rates rose in 2022.

How is pension deficit treated in EV/equity bridge?

The pension deficit (unfunded PBO) is treated like debt — deducted from enterprise value to reach equity value. Some analysts use the full PBO, others use just the net deficit (PBO minus pension assets).

Pension Liability & Funded Status Calculator

Calculate defined benefit pension liability (PBO), funded status, and sensitivity to discount rate and salary growth assumptions. Analyze pension deficit impact on enterprise value, and calculate service cost and interest cost for P&L.

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Pension Liability & Funded Status Calculator

Frequently Asked Questions

How does discount rate affect pension liability?

How is pension deficit treated in EV/equity bridge?