Compound Interest Calculator

When this calculator helps

Compound interest is the reason that starting early matters more than almost anything else in saving. Use this calculator when you are weighing up a Cash ISA, a Stocks and Shares ISA, a workplace or SIPP pension, or a regular savings account, and you want to see roughly where a pot could land after a number of years. It is built for planning conversations, not for promising a precise figure.

It is most useful for the questions people actually ask: how much will my monthly £100 be worth in twenty years, is it worth bumping my pension contribution by another percent, or how much head start does paying in earlier really give me. Because it lets you set an initial amount, a monthly contribution and a rate, you can model regular saving the way most UK accounts genuinely work.

How to read your result

The final balance splits into two parts: what you put in (your initial deposit plus every monthly contribution) and the compound growth on top. The growth figure is the one to watch — early on it is small, but the longer the money compounds, the more the curve steepens. That is the snowball effect doing its work.

Treat the number as a planning estimate in today's terms, not an account statement. It assumes a steady rate every year, which real investments never deliver — markets rise and fall. A 5% assumption is a reasonable long-run middle for a diversified Stocks and Shares ISA once a poor and a good decade average out; cash savings will usually sit well below that.

A worked example

Say you open a Stocks and Shares ISA with £1,000, add £100 a month, and assume 5% a year for 20 years. You would pay in £25,000 of your own money, and compounding could add roughly £16,000 on top — a pot of around £41,000. Push the rate to 7% and the growth more than doubles the contributions over that span, which shows how sensitive the outcome is to the rate you choose.

Common mistakes to avoid

The two errors that throw people off most are over-optimistic rates and forgetting about charges and inflation.

• Using a headline rate without subtracting platform and fund fees — even 1% a year compounds against you significantly over decades.
• Confusing the AER on a savings account with the long-run return on investments; they are not the same thing.
• Ignoring inflation — £41,000 in 20 years buys less than £41,000 does today, so think in real terms.
• Assuming the rate is guaranteed; investment values fall as well as rise.

UK savings and tax notes

In the UK your ISA allowance lets you shelter a set amount each tax year (currently £20,000 across all ISA types) so that interest, dividends and gains inside the wrapper are free of UK tax. Outside an ISA, the Personal Savings Allowance covers some interest, and dividend or capital gains tax may apply depending on your income and the product. This calculator shows pre-tax figures, so an ISA's tax-free status is a real advantage on top of the numbers here.

Pension contributions also attract tax relief at your marginal rate, which effectively boosts what lands in the pot — something this calculator does not model. For anything tied to your specific tax position, check HMRC guidance or speak to a regulated financial adviser.