Actuarial Valuation is an appraisal where it is required to make demographic and economic assumptions to correctly estimate liabilities in the future. If it connected to a company’s benefit pension scheme, then it simply refers to a strategy that considers meeting pension payments in the future. In this case, the investment strategy will focus on contributions and investment returns to determine future liabilities. An actuary usually carries out actuarial valuation every three years.
Actuarial Valuation depends on assumptions which are derived from long-term data. This restricts such appraisal to only anticipated trends and long-term market conditions instead of relying on short-term trends and economic factors.
In case of an actuarial valuation of pension fund measuring fund’s assets can be easy but measuring liabilities will require careful study of total value of pension payouts along with assumption regarding expected growth of fund’s assets at a specific time in the future.