What your result means
This mode covers the situation where money arrives all at once but is not needed yet. The pot at start of withdrawals shows what the lump sum grows into during the waiting period, and the headline shows how long an income drawn from that larger pot then lasts.
The growth phase is doing more work than most people expect. Deferring the first withdrawal by even a few years raises the corpus and shortens the period it has to cover, and both effects push in the same direction — which is why delaying the start of an income is usually the most effective single change available.
For tax, the original lump sum is the cost basis. Every later withdrawal is split between returned capital and gain in proportion, so the tax on withdrawals figure starts low and climbs as the growth portion of the balance rises.
The gap between receiving and spending is where the plan is won
Redundancy payments, inheritances, business sales and maturing policies all share a shape: a large amount arrives at a moment you did not choose, for a purpose that starts later. What happens in that gap decides most of the outcome.
Left in cash, the money loses real value every year. Invested and left alone, even a modest period of growth can add years to the income it eventually supports. This mode exists to put a number on that gap so it stops being a vague intention.
How it works
The lump sum is invested in month one and compounds untouched for the growth period you set, with charges deducted monthly. No withdrawals are taken during this phase.
At the end of the growth period the withdrawal phase begins from that balance, taking your monthly amount out first and growing the remainder. The original lump sum carries through as the cost basis for tax.
If you switch on the stress test, the five bad years are applied to the start of the withdrawal phase rather than the growth phase — that is where the damage is done, and it is the scenario worth planning against.
How to use this calculator
- Enter the lump sum you are investing.
- Set how many years it grows before you start drawing on it.
- Enter the monthly income you want once withdrawals begin.
- Add inflation, charges and a tax preset in Advanced options.
- Compare a few different growth periods — the difference is usually larger than you expect.
Formula
PV = the lump sum, n = months of untouched growth, C = the corpus at handover, W = monthly withdrawal, i = net monthly return after charges.
Worked example
£200,000 invested and left for 10 years at 9%, then withdrawing £4,000 a month:
Income then lasts 21 years 10 months
Total withdrawn £1,045,696
Final £4,000 is worth £2,098 today
With five bad years at handover:
Income lasts 10 years 2 months
Ten years of untouched growth more than doubles the £200,000, and that alone turns a short income into a twenty-year one. But look at the last line — the same plan halves if the market turns just as the withdrawals begin. Holding two or three years of income in cash at the handover is the standard defence, and it costs surprisingly little in expected return.
Frequently asked questions
Should I invest a redundancy payment or keep it in cash?＋
It depends entirely on when you need it. Money required within about five years generally belongs in cash or short-dated bonds, because there may not be time to recover from a fall. Money not needed for a decade has historically done far better invested — this calculator lets you model the actual gap rather than guessing.
How does the tax work on this?＋
The lump sum you invested is your cost basis. Each withdrawal is part capital and part gain in proportion to how much of the balance is growth, and only the gain is taxable. With the UK preset, the £3,000 annual exempt amount is applied each year before your 18% or 24% rate — spreading withdrawals across tax years is what keeps the bill low.
What if I need to start drawing earlier than planned?＋
Shorten the growth period and re-run it. You will usually find the income phase shortens by considerably more than the years you removed, because you lose both the extra compounding and the smaller balance it would have produced.
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Assumptions & limitations
A deferred-income plan carries the limits of both phases:
- Returns are assumed constant every year. Real markets are not — they deliver the average through a sequence of good and bad years, and the order those arrive in changes the outcome.
- Growth is compounded monthly from the annual rate you set, so 10% a year becomes 0.797% a month rather than a flat 0.833%.
- Fund charges are deducted monthly from the balance. Platform fees, trading costs and bid-offer spreads are not modelled separately — fold them into the charge figure if you want the full picture.
- Inflation is applied at a single constant rate to produce the "today's money" figures. Your personal inflation rate depends on what you actually buy.
- Nothing here is financial advice, and no projection is a promise. Use it to compare scenarios against each other, not to predict a number.
- One expected return is used for both the growth and the withdrawal years, though most people reduce risk once the income starts.
- No withdrawals or additional contributions are made during the growth period.