Capital Needs Analysis Calculator
The method UK financial advisers use: the lump sum needed to fund a target family income for a set period, plus one-off costs.
Income the family needs
In today's money. Often net household income less the deceased's own spending.
E.g. until the youngest child is 18, plus university.
Economic assumptions
Income assumed to rise with inflation each year.
Return on the lump sum, net of inflation. 1.5–2.5% is typical for cautious investing.
One-off needs
UK average is around £4,000–£5,000.
Savings, investments and existing life cover.
How it adds up
Why advisers prefer Capital Needs Analysis
Unlike DIME or a flat income multiple, Capital Needs Analysis (CNA) models the actual problem: how large a lump sum, invested sensibly, would generate the income your family needs for as long as they need it. Because we discount the income at a real rate (return net of inflation), the figure already allows for the rising cost of living.
How CNA differs from DIME. DIME multiplies income by a fixed number of years with no investment return; CNA recognises that a lump sum keeps earning while it is drawn down, which usually means you need less to fund the same income, but it adds precision around the period and the assumed return.
Don't forget State support. Bereaved families with dependent children may qualify for Bereavement Support Payment (a lump sum plus monthly instalments). Reducing your target income or years to reflect this can lower the cover you need. Check current rates on gov.uk.
Trusts and Inheritance Tax. As with any life policy, writing it in trust generally keeps the payout outside your estate for Inheritance Tax and speeds up payment to your family. Cross-check the income side against the Annuity Calculator and your retirement plan with the Pension Calculator.
Educational guide only, not financial advice. For a tailored figure, speak to an FCA-regulated adviser.
Related calculators
Other free UK tools that follow on from this calculation.
Life Insurance Calculator
How much life cover you need, DIME, income multiplier and Capital Needs Analysis, side by side.
Inheritance Tax Calculator
IHT at 40% (or 36% with 10% to charity) using both nil-rate bands and spouse transfers.
Pension Calculator
Project workplace auto-enrolment and SIPP contributions to estimate retirement income.
Annuity Calculator
Convert a pension pot into a guaranteed retirement income, single or joint life.