A Step-Up SIP allows you to increase your investment amount annually by a fixed percentage. This aligns with growing income and accelerates wealth creation. Each year, the new higher SIP amount earns returns for its remaining tenure, compounding the growth effect significantly.

How the calculation works

Step-Up SIP uses a growing annuity formula:

FV = Σ [P × (1 + g)^(y-1) × ((1 + r)^(n - m(y-1)) - 1) / r × (1 + r)]

Where:
P = Initial Monthly Investment
g = Annual Step-Up Rate
r = Monthly Rate of Return
n = Total Months
y = Year Number
m = Months in a year (12)

A quick example

Let us calculate step-up SIP returns with annual increase:

Initial Monthly SIP:₹5,000

Annual Step-Up:10%

Expected Return:12%

Investment Period:20 years

Step by step

1.Year 1: ₹5,000/month invested for 20 years
2.Year 2: ₹5,500/month (10% increase) invested for 19 years
3.Year 3: ₹6,050/month invested for 18 years
4.And so on — each year the amount increases by 10%
5.Year 20: ₹30,578/month invested for the final year

So the answer is: Total Invested ≈ ₹22,00,000 | Maturity ≈ ₹85,00,000+ | Total Returns ≈ ₹63,00,000+

Frequently Asked Questions

What is a Step-Up SIP?

A Step-Up SIP allows you to increase your SIP investment amount annually by a fixed percentage. This helps you invest more as your income grows.

Why use a Step-Up SIP?

Step-Up SIP aligns with your growing income. A 10% annual increase can significantly boost your final corpus due to the power of compounding.

What is a good step-up percentage?

A 10% annual step-up is commonly recommended as it aligns with average salary hikes and inflation.

How does step-up affect returns?

Step-Up SIP increases your total investment over time, which leads to a larger corpus. The compounding benefit applies to the progressively higher investment amounts.