Longevity and Time value of money: Difference between pages

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''Pensions''.
''Investment and funding appraisal.''


A measure of the life expectancy of current and future pensioners and other beneficiaries of a pension scheme.
(TVM).  


From the perspective of the pensions provider, there is therefore a related 'longevity risk'.
Time value of money is the concept that money held now (or receivable immediately) is worth more than the same amount of money to be received at some later time.


Longevity risk refers to the increased cost of providing pensions, resulting from improvements in health and increases in average life expectancy.
The time value of money is reflected in the charging of interest for the use of money, and also in discounted cash flow analysis.


A closely related term in pensions valuation and management is 'mortality'. 


Mortality refers to the relative proportions of groups of pension scheme members who are expected to die in a given period. 
All other things being equal, the time value of money means:


So as mortality rates decrease, average life expectancy increases accordingly.
*Earlier receipts are better than later ones.
 
*Later payments are better, compared with earlier payments.
 
*Later receipts are worse.
 
*Earlier payments are worse.




== See also ==
== See also ==
* [[Mortality]]
* [[Compound interest]]
* [[Pension liabilities]]
* [[Discounted cash flow]]
* [[Float]]
* [[Future value]]
* [[Interest]]
* [[Investment appraisal]]
* [[Opportunity cost]]
* [[Present value]]
* [[Simple interest]]
* [[Time value]]
 
[[Category:Corporate_finance]]
[[Category:Investment]]

Revision as of 18:38, 30 October 2021

Investment and funding appraisal.

(TVM).

Time value of money is the concept that money held now (or receivable immediately) is worth more than the same amount of money to be received at some later time.

The time value of money is reflected in the charging of interest for the use of money, and also in discounted cash flow analysis.


All other things being equal, the time value of money means:

  • Earlier receipts are better than later ones.
  • Later payments are better, compared with earlier payments.
  • Later receipts are worse.
  • Earlier payments are worse.


See also

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