Step-Up SIP Math: Rs 100 Yearly Increase Lifts a Rs 1,000 SIP's 10-Year Corpus 35% at 12%
A step-up SIP that raises a Rs 1,000 monthly instalment by Rs 100 every year reaches about Rs 3.15 lakh in 10 years, against Rs 2.32 lakh for a flat SIP. These are illustrative figures at an assumed 12% annualised return. Returns are not guaranteed.
How the step-up SIP calculation works
A step-up SIP raises the monthly instalment by a fixed amount or percentage, usually once a year. Here the instalment rises from Rs 1,000 in year one to Rs 1,100 in year two and Rs 1,900 in year 10. The calculation assumes a monthly return of 1% (12% divided by 12), with each instalment invested at the start of the month. It ignores taxes, exit loads and expense ratios.
| Year-end | Flat SIP value | Step-up monthly SIP | Step-up SIP value |
|---|---|---|---|
| 1 | Rs 12,809 | Rs 1,000 | Rs 12,809 |
| 3 | Rs 43,508 | Rs 1,200 | Rs 47,513 |
| 5 | Rs 82,486 | Rs 1,400 | Rs 97,026 |
| 7 | Rs 1,31,979 | Rs 1,600 | Rs 1,65,343 |
| 10 | Rs 2,32,339 | Rs 1,900 | Rs 3,14,536 |
Flat SIP versus step-up SIP
| Reading | Flat SIP | Step-up SIP | Difference |
|---|---|---|---|
| Total invested | Rs 1,20,000 | Rs 1,74,000 | +Rs 54,000 |
| Estimated returns | Rs 1,12,339 | Rs 1,40,536 | +Rs 28,197 |
| Corpus after 10 years | Rs 2,32,339 | Rs 3,14,536 | +Rs 82,197 (35.4%) |
The extra Rs 54,000 comes from raising the instalment by Rs 100 a month each year, which is 1,200 rupees a year for the first step, 2,400 for the second and so on to Rs 10,800 in year 10. The sum of those increments across the nine steps is Rs 54,000.
What the numbers show
The corpus is 35.4% higher, but total investment is 45% higher. That is why the step-up corpus is 1.81 times the amount invested, compared with 1.94 times for the flat SIP. Later instalments have less time to compound, so each extra rupee earns less than the earliest rupees. Even so, the extra Rs 54,000 grows to Rs 82,197, about 1.5 times.
The Rs 100 step is a fixed amount. Raising the instalment by 10% a year instead would give about Rs 3.37 lakh from about Rs 1.91 lakh invested on the same assumptions. This is TradeKaizen's own calculation.
Limits of the illustration
The 12% return is an assumption, not a promise. Actual returns on equity mutual funds vary year to year and can be negative over short periods. Taxes and fund costs would reduce the figures. The numbers are for comparing two contribution patterns, not for predicting the value of any scheme.
