Pension Value Calculator
Listing future income like pensions on your net worth statement can be difficult. This calculator converts a future income stream into a lump sum in today's money, so you list a pension or annuity along with your other assets. This calculator is built into WealthTrunk, so you can track future income alongside everything else you own.
For illustrative purposes only. Not financial, tax, or investment advice.
How many years the income is paid for, starting in 2036.
The return you could otherwise earn on a lump sum today.
If your provider gave you a transfer or commuted value, use that number instead — it reflects your actual scheme.
Put it on the balance sheet. WealthTrunk has account types for employer pensions, state pensions and annuities, with this same calculator built in so the value updates alongside everything else.
Try the appHow present value works
A dollar paid in thirty years is worth less than a dollar today, because a dollar today could be invested in the meantime. Present value runs that logic backwards: it asks what lump sum, invested at your discount rate, would produce the same stream of payments.
Each payment is discounted
Every monthly payment is divided by growth at the discount rate over the time until it arrives. Payments far in the future shrink the most.
The stream is summed
All the discounted payments across the term are added together, giving the value at the moment the income starts.
Deferral is applied
If the income hasn't started yet, that figure is discounted again across the waiting years to bring it back to today.
The chart shows cumulative payments actually received — flat until the income starts, then climbing. The headline figure is the discounted value of that whole stream, which is why it's far lower than the total paid out.
Choosing a discount rate
| If your income is… | Typical rate | Why |
|---|---|---|
| Fixed — never rises | 5–7% | A higher rate accounts for inflation eroding fixed payments over time |
| Inflation-adjusted | 2–4% | Payments keep pace with prices, so less discounting is needed |
The rate you pick moves the answer more than any other input. It's worth trying both ends of the range to see how wide the result gets.
Pension value FAQ
Why would I need the present value of a pension?
A net worth statement needs one number per asset, and a pension pays out over decades instead. Present value converts that future income stream into a single lump sum in today's money, so the pension can sit on the same balance sheet as your accounts and property.
What discount rate should I use?
The discount rate is the return you could otherwise earn on a lump sum today. For a fixed pension that doesn't rise with inflation, a higher rate of roughly 5–7% accounts for inflation eroding those future payments. For an inflation-adjusted pension, a lower rate of roughly 2–4% is more appropriate. A higher rate always produces a lower present value.
What term length should I choose?
How many years you expect the income to be paid. For a lifetime pension, pick a reasonable life expectancy — many people use age 90. Longer terms increase the present value, but with diminishing effect: at a 5% discount rate, payments 50 years out contribute very little.
Why is there no lifetime or perpetuity option?
It was deliberately left out. Treating income as lasting forever overstates its value at older ages and lets you avoid thinking about an end date. Forcing a term makes that assumption explicit. If you really want to approximate 'forever', set the term to 50 years — at a 5% discount rate that captures around 98% of the perpetuity value anyway.
My provider gave me a transfer value. Should I use that instead?
Yes. If you have a provider-issued lump sum — a CETV, commuted value, or cash-balance figure — use that number. It reflects your actual scheme's terms and is far more precise than any general-purpose calculator.
Does this account for survivor benefits or inflation indexing?
No. This is deliberately an elementary calculator. Joint-life survivorship, mortality tables, COLA indexing, and tax treatment are all omitted. Those factors can move the answer substantially, so treat the result as a ballpark rather than a valuation.
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