What your result means
A step-up SWP raises your monthly withdrawal on each anniversary. That keeps the real value of your income roughly level, which is what a flat withdrawal fails to do — and it is the difference between a plan that works on paper and one that works in a supermarket.
The price is time. Because every year you take more out, the balance falls faster and the compounding has less to work with. Expect indexing your income to inflation to shorten a pot's life by something like a quarter compared with the same starting withdrawal held flat.
Look at final monthly withdrawal and its today's-money equivalent together. If the step-up rate matches inflation, the two should stay close — the nominal figure climbs steeply while the real figure barely moves. That is the plan working exactly as intended.
A flat income is a shrinking income, and the maths is brutal
Withdraw £2,000 a month and never change it, and at 3% inflation you have taken a real pay cut of about 26% by year ten and 45% by year twenty. The pot may last beautifully; your standard of living will not.
Stepping the withdrawal up is the fix, and it is not free. This calculator exists to show the trade honestly — how many years you give up to keep your income intact, so you can decide whether to accept a shorter plan, a smaller starting income, or a bit of both.
How it works
The monthly loop is the same as a standard SWP: withdraw, grow the remainder, deduct charges. On each anniversary the withdrawal is multiplied by your step-up percentage, or has your fixed increase added.
Because withdrawals compound upward while the balance compounds downward, the two curves meet abruptly. Step-up plans do not taper — the balance looks healthy for years and then falls off a cliff in the last three or four, which is clearly visible in the chart.
Tax is assessed annually on the gain portion of the year's withdrawals, so the tax bill rises through the plan as the balance becomes proportionally more growth and less original capital.
How to use this calculator
- Enter your starting corpus.
- Enter the monthly withdrawal you want in year one.
- Set the annual increase — a percentage, or a fixed cash amount.
- Set the return you expect, and add inflation and charges in Advanced options.
- Turn on the stress test, then compare against the same plan with the increase set to zero.
Formula
W0 = first-year monthly withdrawal, s = annual step-up rate, y = plan year, i = net monthly return. There is no closed-form solution for how long this lasts, so it is simulated month by month.
Worked example
A £500,000 pot, first-year withdrawal £2,000 a month rising 5% a year, earning 8% with 3% inflation:
Total withdrawn £1,859,907
Final monthly withdrawal £10,006
— worth £3,829 in today's money
With five bad years first (−2%):
Money lasts 18 years
Note the final withdrawal: £10,006 a month sounds extravagant until you see it is worth £3,829 in today's terms — and that stepping up at 5% against 3% inflation has actually grown the real income, not just protected it. Set the step-up to 3% instead and the pot lasts materially longer while the real income stays flat.
Frequently asked questions
What step-up rate should I use for withdrawals?＋
Match it to the inflation rate you expect, which keeps your real income level. Setting it higher gives you a rising standard of living and a much shorter plan. Setting it lower is a slow, deliberate real-terms pay cut — sometimes the right answer, since spending typically falls in later retirement.
Why does a small step-up cost so many years?＋
Because it compounds against you at the same time as the balance shrinks. Each increase takes more out of a pot that has less left to grow, so the effect accelerates. The last few years of a step-up plan are where almost all the damage lands.
Is this the same as pension drawdown?＋
The mechanics are the same — a variable income drawn from an invested pot. The tax is not: UK pension drawdown is taxed as income after a tax-free portion, whereas withdrawals from a fund held outside a pension are taxed as capital gains. Use the UK preset here for the latter, and speak to a pension provider for the former.
Related calculators
Assumptions & limitations
Rising withdrawals magnify every modelling weakness. In particular:
- 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.
- Increases are applied once a year and never paused. In practice most people cut back voluntarily after a bad year, which extends a plan considerably.
- Unless the stress test is on, returns are constant — which flatters a step-up plan more than any other mode, because it is the most sensitive to early losses.