Guide
Increase Contributions Every Year (Step-Up Example)
Raising monthly contributions over time can change long-term outcomes. Here’s a simple 5% step-up illustration and how to model it.
Published: March 12, 2025 · Updated: December 21, 2025 · By FinToolSuite Editorial
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Model flat vs step-up contributions and see how the totals change.
Open the calculatorQuick answer
“Step-up contributions” means increasing your monthly deposit by a fixed % each year (e.g., +5%). Each year’s higher deposit starts compounding once it’s added. More on monthly deposits: monthly contributions and compounding.
Disclaimer
Educational purposes only; not financial advice. Examples are illustrative; real returns vary and investments can go down as well as up. Fees, taxes, inflation, and rules vary by provider and country.
What step-up contributions are
Monthly deposits stay the same within a year, then increase at the anniversary by a set percentage. People model this when income rises or when they want to accelerate progress toward a goal.
Worked example (+5% yearly)
Starting amount: £1,000. Starting monthly contribution: £100. Step-up: +5% per year. Time horizon: 10 years. Assumed rate: 5% (illustrative).
| Year | Monthly contribution |
|---|---|
| 1 | £100 |
| 2 | ~£105 |
| 3 | ~£110 |
| 4 | ~£116 |
| 5 | ~£122 |
Over 10 years, the total contributed increases each year. For illustration, a simple run might show total contributed around ~£13,500 and an ending balance higher than a flat £100/month plan at the same rate. Use the calculator to see precise numbers with your assumptions.
Flat vs step-up (illustration)
Example: £1,000 starting, £100/month flat vs +5% yearly step-up, 5%, 10 years, monthly compounding (illustrative only).
| Scenario | Total contributed (approx.) | Ending balance (approx.) |
|---|---|---|
| Flat £100/month | ~£13,000 | ~£21,000 |
| Step-up +5%/yr | ~£13,500 | ~£22,000 |
Illustration only—numbers shift with different rates, timelines, and exact step-up rules.
How to model step-ups in the calculator
- Run a flat contribution scenario (e.g., £100/month).
- Approximate a step-up by increasing the contribution every few years, or use an average contribution as a rough stand-in.
- Save multiple scenarios (flat vs adjusted) to see the range.
Lifestyle inflation warning
Raises can get absorbed by higher spending. Check how your costs are changing with the Lifestyle Inflation Detector.
Common mistakes
- Increasing contributions too frequently (e.g., monthly) when modelling a yearly step-up.
- Changing several inputs at once, making comparisons unclear.
- Treating projections as guarantees.
FAQ
What does it mean to increase contributions every year?
It means raising your monthly deposit by a set percentage on a yearly schedule (e.g., +5% each year).
How much difference does a 5% yearly increase make?
It can raise total contributions and interest earned over time. The impact grows with longer timelines.
Is it better to increase contributions or increase the rate?
They affect results differently. A higher rate boosts growth on all funds; higher contributions add more principal. Test both.
How do I model step-ups in a simple calculator?
Use multiple scenarios: start with a baseline, then increase the monthly amount in later years or use an average as a rough proxy.
Should I adjust for inflation?
You can test a lower rate to approximate after-inflation results. It’s still an estimate.
What if my income doesn’t rise every year?
You can pause step-ups or keep contributions flat in some years to reflect your situation.
What if I pause contributions some years?
Pausing reduces total contributions and future interest. You can model this by setting contributions to zero for those periods.
How do fees/taxes affect long-term results?
They lower effective outcomes. You can model a lower rate as a rough adjustment.
Compare flat vs step-up in the tool
Run a flat contribution scenario and a yearly step-up scenario to see the range.
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