The perpetuity formula.
The income capital pool is sized so that its annual yield exactly funds the income obligation. The formula is Capital Required = Annual Income ÷ Net Yield. At 4% net yield, every £1 of annual income obligation requires £25 of capital. £120,000 per beneficiary annually requires £3,000,000 per beneficiary. Ten beneficiaries: £30M income pool generating £1.2M annually. The principal is never drawn down — only the yield is distributed.
Net yield is after fees, tax, and administration.
The yield assumption applies to the income capital pool's net return after investment manager fees, applicable taxes within the Trust structure, audit costs, and Trustee administration. The blended portfolio described in the Trust deed targets ~4.3% gross yield, which the document treats as comfortably exceeding the 4% net assumption. The 3% scenario is a conservative downside test; the 5% scenario assumes meaningful outperformance from the diversified mandate.
Lump sum pool — fixed regardless of yield.
The lump sum pool is the sum of all one-time distributions: beneficiaries × £10M (or whatever you set). It does not depend on yield because it's not generating income — it's a capital distribution. For newborn beneficiaries, the lump sum is held and actively managed within the Trust until age 18 and completion of the financial education programme; for adult beneficiaries, it distributes directly on the Trust's distribution date.
The 15% reserve.
Added on top of the lump sum and income capital pools to cover: CPI indexation of monthly payments (the deed should provide for annual CPI adjustment), one-off and ongoing professional fees (solicitors, investment managers, auditors, Trustees), unforeseen contingencies, and working-capital liquidity. The 15% figure is the document's working assumption — a five-year actuarial review should reassess whether it remains adequate. Toggle the reserve off to see the bare structural minimum.
Newborn beneficiaries.
Each newborn carries the same allocation as any other beneficiary — £10M lump sum and £10K/month. Both flow directly into the Trust, not to parents or guardians. The lump sum is invested under the same mandate as the main income pool. The monthly income accumulates in a ring-fenced sub-account, also invested. At 18, conditional on completion of the financial education programme, the beneficiary receives the lump sum plus all accumulated income plus investment growth on both. The calculator does not separately account for the accumulated growth on newborn capital — at 4% net over 18 years, the accumulated monthly income alone would compound to roughly £3.1M nominal in addition to the £10M lump sum.
Future newborns.
The Trust deed should provide for the addition of future beneficiaries without requiring deed amendment — a simple Trustee resolution should suffice. Each addition requires the lump sum pool to be supplemented by £10M and the income pool by £3M (at 4% net) per new beneficiary. The Trustees must confirm this additional capital is in place before formal registration. Adjust the beneficiaries slider above to model what each addition costs.
What this calculator does not model.
Several things are deliberately out of scope: (1) the IHT seven-year taper relief on the transfer into the Trust — see the Trust document's IHT section for that math; (2) the accumulated growth on newborn lump sums during the managed period; (3) variable income across beneficiaries — the model assumes equal terms, which the Trust deed enforces; (4) any chargeable lifetime transfer charges or ongoing periodic Trust charges (these depend on the structure chosen — discretionary, IIP, or hybrid — and should be calculated by your trust solicitor); (5) currency or international tax overlays. The calculator is a structural planning tool, not a tax or legal advice instrument.
The capital preservation principle.
Across every configuration you can dial in here, one principle holds: the income capital pool's principal is never distributed. It generates the yield; only the yield is paid out. Whatever total capital figure you arrive at, the income capital portion remains intact in perpetuity. The lump sum pool is the only component that actually leaves the Trust over time — and only as one-time distributions to named beneficiaries, with newborns waiting until 18.