What this calculator works out
This calculator answers two related questions at once. It shows what a sum of money will buy after a chosen number of years of inflation, and how much cash you would need in the future to match today's purchasing power.
Both are exact given the inflation rate you enter. The uncertainty is entirely in that rate — nobody knows what inflation will average over the next decade, which is why the figure is yours to set rather than fixed in the tool.
Enter your details
Before you choose a rate
- Understand which question you are asking. Buying power falling and cash needed rising are two views of the same effect, not two separate results.
- Pick a rate deliberately. The Bank of England's target is 2%; recent UK experience has included both long periods well below it and a sharp period well above it.
- Remember your personal inflation rate differs from the headline. CPI is a basket average — if a large share of your spending goes on energy, rent or childcare, your experience may be considerably higher.
- For a long horizon, run the calculation across a range of rates rather than trusting a single figure.
At 3% over ten years, £10,000 falls to about £7,441 of buying power — a drop of roughly 26%. But matching today's £10,000 in ten years' time needs about £13,439 — a rise of roughly 34%. The percentages differ because they are measured against different starting points, which is a routine source of confusion.
How this calculator works
Both figures come from the same compounding relationship, applied in opposite directions:
Future buying power = amount ÷ (1 + i)n
Future cash needed = amount × (1 + i)nWhere i is the annual inflation rate as a decimal and n is the number of years. The calculator assumes a constant rate throughout, which no real period ever delivers; it is a way of expressing an average, not a prediction of the path.
Worked example: £10,000 over ten years
Using the default figures — £10,000 at 3% inflation for ten years:
- Compounding factor: 1.0310 = 1.3439
- Future buying power: £10,000 ÷ 1.3439 = £7,440.94
- Future cash needed: £10,000 × 1.3439 = £13,439.16
The practical consequence is the part worth sitting with. Cash left in an account paying nothing for ten years loses about a quarter of what it can buy, without the balance ever falling. This is why an account paying less than inflation is losing value in real terms even while the statement shows a gain, and why long-term money is rarely held entirely in cash.
Common mistakes
- Confusing the two outputs. Buying power is what your money becomes; cash needed is what you must have to stand still.
- Assuming the headline rate applies to you. CPI is an average across a standard basket, not a measure of your own spending.
- Projecting a recent spike far into the future. Inflation is volatile over short periods and mean-reverting over long ones.
- Comparing an investment return with inflation without checking whether it is a real or nominal figure. A 5% return with 3% inflation is a real return of roughly 1.9%, not 2%.
- Ignoring it entirely on long-term goals. Over twenty or thirty years, inflation is often the single largest factor in whether a plan works.
Frequently asked questions
What inflation rate should I use?
For general planning, the Bank of England's 2% target is a defensible central assumption, since policy is directed at achieving it over the medium term. For a cautious plan, 3% is common. The most useful approach is to run the calculation at two or three rates and look at the spread, because the difference between 2% and 4% over twenty years is very large.
What is the difference between CPI and RPI?
They are different measures using different baskets and formulas. RPI includes some housing costs that CPI excludes and generally runs higher; it is no longer a UK national statistic but still appears in some contracts, rail fares and index-linked products. CPI is the measure the Bank of England's target refers to. Check which one a contract specifies, because the gap is not trivial.
Does this account for wage growth?
No. It shows what happens to a fixed sum. If your income rises in line with inflation, your position is broadly maintained; if it rises more slowly, your real income is falling even when the number on your payslip goes up.
How does inflation affect debt?
It erodes the real value of fixed debt in the borrower's favour — a fixed £100,000 mortgage becomes easier to service over time if wages rise with prices. That advantage does not extend to debt with a variable rate, which often rises when inflation does.
Where can I find the current UK figure?
The Office for National Statistics publishes CPI monthly, and the Bank of England publishes its inflation target, forecasts and the reasoning behind rate decisions. Both are linked in the references below.
Related tools
References
- Office for National Statistics — the official UK Consumer Prices Index and related inflation statistics
- Bank of England — the UK inflation target, forecasts and monetary policy decisions
- MoneyHelper — guidance on protecting savings against inflation
Sources are checked at publication and can change — how I choose and check references.