Inflation Calculator
💡 Bank of England Target
The BoE aims for 2% inflation. Rates above this erode savings faster, while rates below can signal economic weakness.
Future Purchasing Power
£7,763
Loss in Value
£2,237
Percentage Lost
22.4%
What This Means
In 10 years at 2.5% inflation, your £10,000 will only buy what £7,763 buys today.
Purchasing Power Over Time
Shows how £10,000 loses purchasing power at 2.5% annual inflation
UK Inflation History (Last 10 Years)
2024
2.3%
2023
7.3%
2022
9.1%
2021
2.6%
2020
0.9%
2019
1.8%
2018
2.5%
2017
2.7%
2016
0.7%
2015
0%
Source: Office for National Statistics (ONS). CPI annual averages.
Protecting Against Inflation
- • Stocks & shares ISA — Historically returns 7-10% annually, outpacing inflation
- • Index-linked gilts — Government bonds that adjust with inflation
- • Property — Real estate often appreciates with or above inflation
- • High-yield savings — Some accounts offer rates closer to inflation
Why "real" value matters more than the number on your statement
£10,000 today and £10,000 in 20 years are not the same thing in practical terms — inflation steadily erodes what that money can actually buy. This calculator shows the equivalent purchasing power of a sum after a chosen number of years at a given inflation rate, which is the real reason financial advisers stress investing (not just saving) for long-term goals.
The Bank of England targets 2% annual inflation as the level considered healthy for the economy, but as recent UK history shows (9.1% in 2022, driven largely by energy prices), actual inflation can deviate sharply from target for extended periods.
Strategies to protect your money from inflation
Keep cash savings realistic
Cash sitting in a low-interest current account loses purchasing power every year inflation exceeds the interest rate — an emergency fund is essential, but avoid holding excess cash long-term.
Consider inflation-linked assets
Index-linked gilts and some National Savings products adjust their value in line with inflation, offering more protection than fixed-rate alternatives.
Review "real" returns, not headline returns
A savings account paying 4% sounds attractive, but if inflation is running at 3%, your real (inflation-adjusted) return is only about 1%.
Revisit pay and pension growth annually
If your salary or pension isn't rising at least in line with inflation, your standard of living is quietly shrinking each year even without any change in your spending habits.
Related tools
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Frequently Asked Questions
What is inflation?
Inflation is the rate at which prices for goods and services rise over time, reducing the purchasing power of money. The Bank of England targets 2% annual inflation.
How is inflation measured?
In the UK, inflation is measured using the Consumer Prices Index (CPI), which tracks price changes across a basket of typical household goods and services.
Why does inflation matter?
Inflation erodes the real value of your savings. If your savings earn 3% interest but inflation is 4%, your money's real purchasing power actually decreases by 1%.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- Inflation
- The rate at which prices rise over time, eroding the buying power of money. If inflation is 3%, £100 today buys only about £97 worth of goods next year — which is why long-term savings need to beat inflation.
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
