UK Investment Growth Calculator

How Investment Growth Is Calculated

Investment growth compounds: each year's returns earn their own returns the following year. For a lump sum, the formula is:

£10,000 at 6% for 20 years becomes 10,000 × 1.06²⁰ = £32,071. More than two-thirds of that final pot is growth on growth rather than growth on your original money, which is why time invested matters more than timing.

Regular contributions supercharge this effect because every monthly payment starts its own compounding clock. A handy shortcut for lump sums is the Rule of 72: divide 72 by your return to estimate the years to double. At 6%, your money doubles roughly every 12 years. You can check the regular investing performance using our SIP Calculator.

The 30-year figure is a striking one: £94,500 of that pot is investment growth, more than everything you contributed. Doubling the timeframe far more than doubles the outcome, which is the practical case for starting early even with small amounts.

Choosing a Realistic Return

Nobody knows future returns, but history gives sensible planning ranges. Global equities have delivered roughly 5 to 7% a year above inflation over very long periods, though with brutal interim falls. Cash and bonds sit lower. For planning, 2% is cautious, 5% moderate, and 8% optimistic. Running all three shows the range of outcomes rather than a false single answer. Whatever you assume, avoid projecting recent hot performance forward, since strong runs are usually followed by leaner ones.

The Two Quiet Killers: Fees and Inflation

• Fees: A 1% annual charge sounds small but compounds against you exactly as returns compound for you. £100,000 at 6% for 20 years reaches £320,700, while the same investment netting 5% after fees reaches £265,300. That single percentage point cost £55,000. Keeping all-in costs low is the most reliable return boost available. You can compare broker fees using our Share Dealing Fee Calculator.
• Inflation: A projection in tomorrow's pounds overstates tomorrow's spending power. At 2.5% inflation, £166,500 in 30 years buys what roughly £79,000 buys today. Serious planning uses real (inflation-adjusted) returns, which is why the long-run equity figure of 5 to 7% above inflation is the more honest planning number than nominal returns.

Keep the Growth: Use the Wrappers

Where you hold investments changes how much growth you keep. Inside a stocks and shares ISA (£20,000 annual allowance), all growth and dividends are completely tax-free. Pensions add tax relief on the way in, effectively turning £80 of your money into £100 invested for a basic rate taxpayer, in exchange for access rules later. Outside these wrappers, growth faces Capital Gains Tax above £3,000 a year and dividends face dividend tax above £500, both of which nibble the compounding this calculator projects.

Check your potential capital gains using our Capital Gains Tax Calculator and dividend tax using our Dividend Tax Calculator.