Work out how much your UK investments could grow over time using real compound interest maths. Enter your initial lump sum, monthly contributions, expected annual return and time horizon to see your projected final value, total return and an inflation-adjusted figure. Compare your projected growth against FTSE 100 and S&P 500 benchmarks.
| Year | Invested (£) | Growth (£) | Portfolio Value (£) |
|---|
How does your target return compare to major market benchmarks? Use these as a reality check when setting your expected return rate.
Before setting your expected return, understand the risk level that matches your investment strategy and time horizon.
Typical returns: 3–5% p.a.
Cash ISAs, government gilts, money market funds. Capital largely protected but may not beat inflation over long periods.
Typical returns: 5–8% p.a.
Balanced funds, FTSE All-Share ETFs, mixed asset funds. Fluctuations expected but smoothed over 10+ years.
Typical returns: 8–15%+ p.a.
Individual shares, emerging markets, sector ETFs. Higher potential return with significant volatility; suitable for long horizons.
Choosing the right platform can save you significant money in annual charges. Here is a quick comparison of four popular UK platforms.
| Platform | Annual Fee | Fund Choice | Best For |
|---|---|---|---|
| Vanguard | 0.15% (max £375) | Vanguard funds only | Low-cost index investing |
| Hargreaves Lansdown | 0.45% (max £45/yr shares) | Very wide | Hands-on investors |
| Fidelity | 0.35% (max £45/yr shares) | Wide | Larger portfolios |
| AJ Bell | 0.25% (max £42/yr shares) | Wide | Competitive all-rounder |
The Rule of 72 is a quick mental maths shortcut to estimate how long it takes to double your money at a given annual return rate. Simply divide 72 by your expected annual return percentage.
Compound growth is often called the eighth wonder of the world, and for good reason. When your investment earns a return, those earnings are reinvested to generate further returns. Over decades this snowball effect becomes dramatically powerful.
Consider two investors who both earn 7.5% annually. Investor A starts at age 25 with £5,000 and contributes £200 per month. Investor B starts at age 35 with the same amount and the same monthly contribution. By age 65, Investor A has roughly twice as much wealth as Investor B, purely because of the extra ten years of compounding. This is why financial experts universally recommend starting to invest as early as possible, even with small amounts.
Monthly compounding produces slightly higher returns than annual compounding because your earnings are reinvested twelve times per year rather than once. For example, £10,000 invested at 7.5% for 10 years grows to:
Outside an ISA wrapper, UK investors may face two types of tax on investment gains.
If you sell shares or funds and your gains exceed the annual exempt amount of £3,000, you pay CGT. Basic rate taxpayers pay 18% on gains above the exempt amount, while higher and additional rate taxpayers pay 24%. Gains within an ISA are completely exempt from CGT.
Dividends received outside an ISA above the £500 annual dividend allowance are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate). Inside an ISA, dividends are completely tax-free, which makes ISAs especially valuable for income-focused investors holding dividend-paying stocks or funds.
Adding a regular monthly contribution is a strategy known as pound-cost averaging (or dollar-cost averaging in the US). Rather than trying to time the market, you invest a fixed amount every month regardless of market conditions. When prices are low you buy more units; when prices are high you buy fewer. Over time this smooths out market volatility and can reduce your average cost per unit.
Our calculator shows how even a modest £100 to £200 monthly contribution dramatically accelerates your portfolio growth compared to a one-off lump sum. Over 20 years at 7.5% return, adding £200 per month to an initial £5,000 generates a final portfolio of over £130,000, compared to around £21,000 from the lump sum alone.
A good annual return in the UK is typically considered 7–10%. The FTSE 100 has averaged around 7.5% annually over the long term when dividends are reinvested, while global index funds linked to the S&P 500 have returned around 10% historically. However, past returns do not guarantee future performance, and you should choose a return assumption that reflects your risk tolerance and investment mix.
Compound interest means you earn returns on both your original investment and any previously earned returns. Over time this creates exponential rather than linear growth. Monthly compounding generates slightly more than annual compounding because returns are reinvested more frequently, giving each earlier return more time to grow itself.
For most UK investors a Stocks & Shares ISA is preferable because all growth and income inside it is completely tax-free. The annual ISA allowance is £20,000 per person. A general investment account is useful once you have used your ISA allowance, or if you need specific investments not available within an ISA structure.
The Rule of 72 estimates how long it takes to double your money. Divide 72 by your annual return rate. For example at 7.5% annual return your investment doubles in roughly 9.6 years (72 ÷ 7.5). At 10% it takes 7.2 years. This is a quick approximation and actual results depend on compounding frequency and whether you are making ongoing contributions.
Popular UK investment platforms include Vanguard (low cost index funds at 0.15% annual fee), Hargreaves Lansdown (wide fund and share choice), Fidelity (good for larger portfolios) and AJ Bell (competitive fees). Compare annual charges, fund range, and account types (ISA, SIPP, general) before choosing. Platform charges can significantly erode returns over long periods.
Inflation erodes the real purchasing power of your returns. If your investment grows at 7% but inflation runs at 3%, your real return is approximately 4%. Our calculator shows an inflation-adjusted figure using your chosen inflation rate, so you can see what your future portfolio will be worth in today's money. The Bank of England targets 2% inflation, though actual rates vary considerably year to year.
Low risk investments such as cash ISAs and government bonds typically return 3–5% annually with minimal chance of capital loss. Medium risk investments like balanced funds or FTSE All-Share ETFs target 5–8% with moderate fluctuations. High risk investments such as individual shares or emerging market funds may return 8–15%+ but can also lose substantial value in the short term. Your risk level should match your investment time horizon and personal capacity to absorb losses.