It is simply a calculation of the actuarial values, but it is slightly less complicated than that. It is based on the person's age.
Suppose that you are 75 years old and that you are counting on using all your funds by the time you turn 100. If, every year, you expect to have a 5% rate of return on your investment and you want to escalate your pension by 2% a year, you will therefore need to withdraw an amount this year with the age of 75 in mind. That calculation is basically done every year.