Compound interest calculator (UK)

Work out how a lump sum and regular monthly contributions grow over time, once investment growth, rising contributions, platform charges and inflation are all taken into account.

Figures for the 2026/27 tax year. Last reviewed 01-09-2026.

How compound interest actually works

Compound interest is growth on growth. In year one, your money earns a return. In year two, that return earns a return too, alongside your original capital. Over a couple of years the difference is small. Over twenty or thirty, it's the entire story — most of a long-term pot's final value comes from growth, not from the money you put in.

The calculator above compounds monthly rather than annually, because that's how most pensions and investment platforms actually credit growth and process contributions. It also lets you escalate your monthly contribution each year — useful if you expect your pay, and what you can afford to save, to rise over time.

A worked example

Take £10,000 already saved, £200 a month going in, contributions rising 2% a year, and 5% annual growth with a 0.75% platform and fund charge — a fairly typical combination for a mainstream multi-asset fund. Charges matter here: they come straight off the growth rate, so 5% gross becomes 4.25% net before anything else is worked out.

After 20 years, the nominal total (in future pounds, not today's) comes to just over £111,000, of which around £68,000 is money you actually paid in and the remaining £43,000 is growth. Adjusted for 2.5% inflation, that £111,000 is worth roughly £68,000 in today's spending power — barely more than the raw amount paid in, once you strip out inflation, which is exactly why the calculator shows both figures rather than just the more flattering nominal one.

What the result actually means

The nominal figure is what your statement will show on the day you reach your target date. The real figure is what that amount could actually buy if prices carried on rising at your assumed inflation rate between now and then. Both are correct — they're just answering different questions. If you're comparing this pot against a cost you understand in today's terms (a mortgage, a target income, a house deposit), the real figure is the one to plan against.

The split between contributions and growth is worth watching too. Early on, most of the pot is money you put in. Later, growth increasingly does the work — which is also why starting early matters more than almost any other single decision, more than optimising the growth rate or the charge by a fraction of a percent.

Common mistakes people make with compounding

The most common one is comparing a nominal projection against today's prices without adjusting for inflation — a pot that looks huge in thirty years' time can be a fairly ordinary sum once you translate it back. The second is ignoring charges, or assuming a 0.2% difference between two funds doesn't matter; compounded over decades, it routinely accounts for a five-figure difference in the final pot.

The third is assuming a single fixed growth rate is a forecast rather than an assumption. Markets don't move in a straight line. Treat any single-rate projection, including this one, as an illustration of the mechanics rather than a prediction of what you'll actually get — and revisit the numbers periodically rather than setting them once and forgetting them.

How this fits with pensions and ISAs

This calculator models pure compounding — it doesn't add pension tax relief, which is a separate boost on top (see the pension tax relief calculator for that). Inside a pension or a Stocks & Shares ISA, the growth itself isn't taxed as it happens, which is one reason both wrappers tend to outperform an equivalent taxable account over the long run, quite apart from any relief on the way in.

If you're trying to work out whether what you're currently saving gets you to a specific retirement income, rather than just watching a pot grow, the how much do I need to retire calculator picks up from here and works backwards from a target.

Frequently asked questions

Is compound interest the same in a pension as in a savings account?

The mechanics are identical — growth earning growth over time. The difference is what's growing and how it's taxed. A savings account earns interest on cash; a pension or ISA typically holds investments (funds made up of shares, bonds and so on) whose returns tend to be higher over the long run but aren't guaranteed year to year, and the growth isn't taxed as it happens inside either wrapper.

What growth rate should I use?

There's no single right answer, which is why the calculator lets you change it. A cautious multi-asset fund might average 3-4% a year over the long term after inflation; a higher-equity portfolio might average 5-7%, with more ups and downs along the way. Try a low and a high scenario rather than trusting one number.

Why does the real (today's money) figure matter so much?

Because £100,000 in 20 years won't buy what £100,000 buys today. If inflation runs at 2.5% a year, prices roughly double every 28 years. The real figure strips that effect out, so you're comparing like with like against costs and targets you understand in today's terms.

Do charges really make that much difference over time?

Yes. A 0.75% annual charge on a fund growing at 5% doesn't just cost you 0.75% a year — it costs you 0.75% a year compounded, every year, for as long as you hold the investment. Over 20-30 years that routinely works out as tens of thousands of pounds on a substantial pot, which is why it's worth checking your platform and fund charges rather than assuming they're all similar.

Should I contribute monthly or as a lump sum?

Whichever you can actually sustain. A lump sum invested today has more time in the market than the same money drip-fed in over a year, so it has a small mathematical edge on average. In practice, most people are saving from ongoing income, so monthly contributions — ideally rising as pay rises, which is what the escalation setting above models — are the realistic option, and the difference against a lump sum is usually small next to simply starting sooner.