Actuarial calculations involve cash-flow projections for each employee right up to retirement age. Discount rate is one of the crucial financial assumptions and is used to discount the expected future cash flows to arrive at the present value of obligation of employee benefit plans. This rate is determined with reference to market yields on government bonds at the balance sheet date and hence is re-evaluated at every valuation date
The yields on the government bonds have fairly stabilized during the last year and the rates are settled well above 7% for the current period. The below graph shows the comparison of yields at different dates. As at 30th Sept 2023, the discount rates were in the range of 7.2% to 7.4% but for 31st Dec 2023 this range has slightly increased to 7.3% to 7.5% for most of the valuations.
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