What does this calculator show?

In 'Erode purchasing power' mode, you enter an amount you hold today (for example, cash savings or a pension pot) and see what it will buy in future years. Inflation steadily reduces the real value of a fixed sum. In 'Future target in today's money' mode, you enter a future amount (for example, your retirement income target) and see what that represents in today's terms. Both modes help you understand whether your savings are keeping up with the cost of living.

What inflation rate should I use?

The Bank of England's target is 2% per year. Actual UK CPI has averaged around 2.5-3% over the last decade, with a period of much higher inflation (7-11%) in 2022-2023. For long-term financial planning, 2-3% is a reasonable base case. For a more cautious plan, use 3-4%. The ONS publishes official UK CPI and RPI data if you want to use a specific historical rate.

What is the difference between CPI and RPI?

CPI (Consumer Prices Index) is the main measure of UK inflation, targeted by the Bank of England. RPI (Retail Prices Index) is an older measure that includes housing costs such as mortgage interest payments. RPI has historically run about 0.5-1% higher than CPI. Many pension increases, rail fares, and student loan interest rates are still linked to RPI, so it remains relevant for planning purposes.

How does inflation affect my pension?

Inflation is one of the biggest risks to retirement savings. If your pension pot is £300,000 and you expect to retire in 20 years, inflation at 2.5% means you will need around £490,000 in nominal terms to have the same purchasing power. This is why pension projections typically show both a nominal and a 'real terms' (inflation-adjusted) figure. Choosing investments that grow above inflation is crucial for long-term financial security.

Does inflation affect cash savings?

Yes. If you hold cash earning less interest than the inflation rate, your money loses real value every year. For example, if inflation is 3% and your savings account pays 2%, you are losing 1% of purchasing power annually. This is sometimes called a 'real negative return'. To preserve purchasing power, your savings need to earn at least as much as inflation after tax.

Savings & Investing

Inflation Calculator

See how inflation erodes purchasing power over time, or find out how much a future amount is worth in today's money.

Updated April 2026

Your details

Calculation mode

Amount today

Annual inflation rate

Bank of England target is 2%. Historical UK average ~2.5%.

Number of years

Your results

Purchasing Power of £10,000 After 20 Years

Equivalent value today

£6,103

Purchasing power lost

39.0%

Amount today: £10,000
Annual inflation rate: 2.5%
Purchasing power lost: £3,897

Breakdown

Amount today: £10,000
Annual inflation rate: 2.5%
Equivalent value in today's money after 20 years: £6,103
Purchasing power lost: £3,897 (39.0%)
Amount needed in 20 years to maintain purchasing power: £16,386

Year-by-year purchasing power

Year	Real Value	Purchasing Power Lost
1	£9,756	£244
2	£9,518	£482
3	£9,286	£714
4	£9,060	£940
5	£8,839	£1,161

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Frequently asked questions

Sources & methodology

Built and maintained by Tim, a personal finance enthusiast (not a financial adviser). Last reviewed April 2026. Rates and thresholds come from official UK government publications.

GOV.UK · UK government legislation and guidance
HMRC · Tax rates, thresholds and official guidance

Figures are estimates only. This is not financial or tax advice. For help with your specific situation, speak to HMRC or a qualified adviser.