Compound Interest Calculator

Compound interest is interest paid on interest already earned. It is the single most important concept in long-term saving and investing: a pot growing at 7% compounded annually doubles roughly every 10 years (the rule of 72: divide 72 by the growth rate to get the doubling time). Over a 40-year working life, that compounding can turn modest monthly contributions into a six-figure pot. £200/month at 6% compounded over 40 years becomes around £400,000 — of which more than £300,000 is growth, not contributions. The standard UK formula for compound interest is A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate as a decimal, n is the compounding frequency per year, and t is years. Most UK savings accounts compound interest daily and credit it monthly or annually — the practical difference between daily and monthly compounding at 5% over a year is just a few basis points (5.127% vs 5.116% AER). What matters far more than compounding frequency is the rate, the term and the regularity of contributions. This calculator handles both lump-sum compounding and regular monthly or annual contributions. It supports any rate and term, and toggles between simple interest (interest only on the original principal — almost no UK product still uses this) and compound interest. Useful for modelling Cash ISA growth, Stocks and Shares ISA portfolio returns, pension funds, Lifetime ISAs, fixed-rate bonds, sovereign bonds (gilts) and any other interest-bearing instrument. Two important caveats. First, real investment returns over decades are rarely linear — UK equities have returned roughly 5% real per year on average since 1900 but with huge year-to-year variation; a flat compounded projection smooths over crashes that may matter at the wrong moment in your timeline (sequence-of-returns risk). Second, inflation eats nominal returns: a 7% nominal return when inflation runs at 3% is only 4% real. The calculator shows both nominal and inflation-adjusted figures so you do not overestimate purchasing power. For tax-wrapper specific projections use the ISA and Pension Calculators; for retirement income planning use the Pension Calculator combined with the State Pension Forecast.