Free UK Tool

Inflation Calculator

See how inflation erodes purchasing power over time, how much you'll need in future to match today's money, and your real value year by year.

Future Equivalent
Needed to match today's value
Real Value
Of today's amount, if held as cash
Power Lost
Of purchasing power eroded
Year-by-Year Breakdown
Year Future Equivalent Real Value Power Lost
Rate Comparison
Inflation Rate Future Equivalent Real Value Power Lost

Why Inflation Matters for Your Money

Inflation is the rate at which the general level of prices rises over time. Even at the Bank of England's target of 2%, prices roughly double every 35 years. That means £10,000 of savings untouched in a zero-interest account for 35 years would only have the purchasing power of around £5,000 today.

The Savings Rate Trap

If your savings account pays less interest than the inflation rate, your money is losing real value every year — even though the number in your account is going up. This is called a negative real return. For example, if inflation is 3% and your savings account pays 2%, you're losing approximately 1% of real purchasing power per year.

Planning with Inflation in Mind

For long-term goals — retirement, a future property purchase, or a child's education fund — it's essential to think in real terms rather than nominal terms. A retirement pot of £500,000 sounds substantial today, but if inflation runs at 3% for 30 years, that's the equivalent of around £206,000 in today's money. Use the Retirement Planner to model your pot in real terms.

CPI vs RPI

The UK has two main inflation measures. CPI (Consumer Prices Index) is the official target measure used by the Bank of England, currently targeting 2%. RPI (Retail Prices Index) includes mortgage interest costs and typically runs 1–2% higher. Most financial planning uses CPI. Some index-linked products (like older National Savings certificates and some pensions) use RPI.

Frequently Asked Questions

The Bank of England targets 2% CPI inflation per year. Actual UK inflation has varied significantly: it averaged around 2–3% in the 2010s, rose sharply to over 11% in late 2022, and has since fallen back toward the 2% target. For long-term financial planning, 2–3% is a commonly used assumption.
If inflation runs at 3% per year, something costing £100 today will cost £134 in 10 years and £181 in 20 years. Equally, £100 of savings left in a zero-interest account will only buy the equivalent of £74 worth of goods after 10 years, and £55 after 20 years.
CPI (Consumer Prices Index) is the UK government's main measure of inflation and the Bank of England's target measure. RPI (Retail Prices Index) is an older measure that includes housing costs such as mortgage interest payments, and generally runs 1–2% higher than CPI. Most financial planning uses CPI.
To preserve purchasing power, your savings need to grow at least as fast as inflation. Options include high-interest savings accounts or Cash ISAs, Stocks & Shares ISAs invested in equities (which have historically outpaced inflation over the long term), and property. Our ISA Calculator can show you how tax-free growth compares to inflation over time.
For conservative long-term planning, 2.5–3% is a sensible assumption — slightly above the Bank of England's 2% target to account for the possibility of higher-than-expected inflation. For retirement planning over 30+ years, some planners use 3–4% to build in additional safety margin.