Compound interest calculator
See what a starting pot and a regular monthly amount turn into over time, and how much of the final figure is growth rather than money you put in. Nothing is stored and nothing is sent anywhere.
Risk warning. The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. This calculator is an illustration only and is not a personal recommendation.
This is a calculation, not a forecast and not advice. It assumes a steady annual growth rate, which no real investment delivers, and it ignores charges, tax and inflation. Real returns vary year to year and you can get back less than you put in.
Investing can help your money grow over the long term, especially when compared to holding cash. You should keep in mind that investment values can go down as well as up and it’s not guaranteed.
What compounding actually is
Compounding is growth earning growth. In year one you earn a return on what you put in. In year two you earn a return on what you put in plus last year's return. Repeat that for long enough and the returns start earning more than the contributions do.
The variable that matters most is not the rate, it is the time. Doubling the return roughly doubles the outcome. Doubling the years does far more than that, because every extra year compounds on a bigger base than the one before. This is the entire argument for starting a pension earlier than feels comfortable.
The formula is simple enough to check by hand. The lump sum grows by one plus the rate, raised to the power of the number of years. Regular contributions are the future value of an annuity: each monthly payment compounds for however many months are left after it goes in.
What this calculator ignores
Charges
Platform fees, fund charges and adviser fees all come out of the growth. A one per cent annual charge does not sound like much and takes a meaningful bite over thirty years.
Tax
Where the money sits changes the answer entirely. A pension, an ISA and a general investment account produce very different net outcomes from identical gross returns.
Inflation
The final figure is in today's pounds only if you enter a return net of inflation. Otherwise it tells you the number, not what that number will buy.
That returns are never smooth
A steady rate is a modelling convenience. Real markets deliver the same average through a sequence of good and bad years, and when the bad ones fall matters, particularly close to when you need the money.
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