Investment Planning · Chapter 5 / 35
Step-up SIP — beating inflation with annual increments
Adding 10% per year to your SIP amount can lift the 20-year corpus by ~40% vs a flat SIP.
A flat SIP — say ₹20,000 every month for 20 years — falls behind inflation. Twenty years from now ₹20,000 buys what ₹7,000-9,000 buys today. A "step-up SIP" raises the contribution annually so it tracks (or beats) inflation, and the compounding maths is striking.
The mechanic
Pick an annual step-up percentage — 10% is a common choice that matches typical Indian salary growth. Each year on the SIP anniversary, the monthly contribution rises by that percentage.
Year 1: ₹20,000/month. Year 2: ₹22,000. Year 3: ₹24,200. Year 10: ~₹47,000. Year 20: ~₹122,000.
Why it works
You're routing more money into compounding precisely as your income grows and your living expenses stabilise (mortgage gets paid down, kids' early years end). The compounding doesn't just lift the late contributions — it lifts the early ones too, because they now sit alongside more capital working in the market.
The numerical impact
Two equivalent SIPs over 20 years at an assumed 12% CAGR:
- Flat ₹20,000/month: corpus ≈ ₹2.0 cr.
- Step-up ₹20,000 + 10% annual: corpus ≈ ₹3.7 cr.
The step-up SIP delivers ~85% more terminal wealth for the same starting amount. The step-up SIP calculator models this for any percentage.
Practical setup
Most AMCs let you register a step-up SIP at the time of registration — pick the percentage (5%, 10%, 15%) or a fixed-rupee step (₹2,000 per year). Some platforms also offer "Top-up SIP" with the same mechanic.
If the SIP platform doesn't support automated step-ups, you can manually raise the SIP every year — set a calendar reminder for the anniversary.
Sources
- AMFI — Top-Up / Step-Up SIP FAQ · accessed Jun 2026