Running the same ladder once as a lump sum and once as an income target shows the two modes are inverse views of one calculation, reconciling to within the rounding of each rung.
The same ladder, run two ways
The bond ladder designer is one calculator with two modes. The lump sum mode takes the money you have and reports the income it affords; the income target mode takes an income and reports the lump sum it needs. Because both build the same redemption-funded ladder, running one mode and then the other should land back where you started. This article does that run explicitly, on one stated set of inputs, to show the two modes as inverse views of a single calculation rather than two different ladders.
Run it as a lump sum
Suppose a reader enters a lump sum of £60,000, a length of six years, an inflation assumption of 3.0 per cent a year and a 20 per cent tax band. The lump sum mode sizes each rung so its redemption principal funds that year's inflation-uplifted draw, then reports the affordable annual income draw — the first year's figure, in the pounds of the window's first year. To keep the arithmetic visible, the illustration below prices every rung at par, which fixes each rung's price at £1 per £1 of nominal; the real designer uses each gilt's own dirty price, so its figures differ.
With every rung at par, the lump sum divides by the sum of the uplift factors, one for each year: 1.000, 1.030, 1.061, 1.093, 1.126 and 1.159, which total about 6.468. Dividing £60,000 by 6.468 gives a first-year redemption of about £9,276, and each later rung is that figure uplifted by the same factors. The table rounds each rung to the nearest pound.
| Year | Uplift factor | Redemption principal (≈) | Draw funded |
| 1 | 1.000 | £9,276 | £9,276 |
| 2 | 1.030 | £9,554 | £9,554 |
| 3 | 1.061 | £9,841 | £9,841 |
| 4 | 1.093 | £10,136 | £10,136 |
| 5 | 1.126 | £10,440 | £10,440 |
| 6 | 1.159 | £10,753 | £10,753 |
| Total | — | £60,000 | first year £9,276 |
The rungs sum back to the £60,000 lump sum, to within a pound of rounding. The lump sum mode's headline is the first row's draw: about £9,276 a year, rising with the assumed inflation each year after. That is what £60,000 affords on these assumptions and this simplified pricing. The 20 per cent band applies to the coupons the rungs pay while they run, not to the redemption that funds the draw, so a higher band would change what the coupons keep but not the size of the ladder.
Run it as an income target
Next, enter the same assumptions in the income target mode: a target of about £9,276 a year, a six-year window, an inflation assumption of 3.0 per cent. The mode solves the lump sum those draws require. Because the sizing is the same one run backwards, it returns about £60,000 — the figure we began with. The target mode's headline is that lump sum; the rungs it lists are the same six rungs, sized the same way, that the lump sum mode produced.
Why they reconcile
Both modes run one sizing rule: rung k's redemption principal equals the lump sum multiplied by its uplift factor and divided by the sum of all rungs' uplift-weighted prices. The lump sum mode reads that rule forward to get the draw; the income target mode reads it backward to get the lump sum. The only gap between the two answers is the rounding — each rung is rounded to the nearest penny when it is booked, so a run one way and back the other lands within pennies rather than exactly. A reader checking one mode against the other should expect the two lump sums to agree to the penny across the rungs and to within a pound or two in the rounded headline; a larger gap means the two runs were fed different inputs, such as a different length or inflation assumption. That is why the two modes are described as inverse views rather than as independent calculators.
Tracing it to the portfolio
Once a ladder is chosen, its rungs can be booked as trades, and the coupons and redemptions they produce then show up as dated cash flows. The portfolio cash-flow page lists each of those payments and repayments and computes the internal rate of return from the actual money in and out, which is the cash measure of what the ladder has produced. That is a different figure from the ladder's income draw — one is what the cash flows did, the other what a design affords — and keeping them apart is why the two are shown on separate pages. Reading them together gives both the plan and the record: the design's per-year draw, and the cash the booked rungs have actually thrown off.
Background, not advice
This article runs one ladder through both modes to show they are inverse views of one calculation. It is general background on how the figures are put together, not investment, tax or legal advice for any reader's circumstances. The illustration prices every rung at par and rounds to the nearest pound to keep the arithmetic visible; the real designer uses each gilt's own price, so its figures and a reader's will differ. The primary source for a real gilt's price, coupon and maturity is the gilt's own record and the day's market data, and for a tax rate GOV.UK and HMRC.