Inflation & Purchasing Power Calculator 2026-27
What a sum of money today is worth in the future, or what a past sum equals today, at a steady annual inflation rate — the compounding of prices, in pounds.
Inflation compounds the same way interest does: a price level that rises r% a year for n years is (1+r)ⁿ times where it started.
How the inflation & purchasing power calculator 2026-27 works
Inflation compounds the same way interest does: a price level that rises r% a year for n years is (1+r)ⁿ times where it started. Looking forward, an amount you hold today buys 1/(1+r)ⁿ of what it buys now; looking back, a past sum equals that sum × (1+r)ⁿ in today's pounds.
The purchasing-power loss row is the share of today's buying power gone by the end of the period — at 2.6% over ten years, about 22.6%, which is why savings that earn less than inflation shrink in real terms even as the balance grows.
Formula: Adjusted = Amount × (1 + r)ⁿ (future) · Adjusted = Amount ÷ (1 + r)ⁿ (past)
How UK inflation is calculated and compounds over time
Inflation measures how fast prices rise. Because price increases compound each year, even moderate inflation can dramatically erode purchasing power over decades.
Compound inflation formula
Future value = Amount × (1 + rate)^years. At 2.6% inflation — the CPI rate for the 12 months to June 2026 — you would need £1,293 in ten years' time to buy what £1,000 buys today. Put the other way round, £1,000 left in a drawer for ten years would have the purchasing power of just £774 in today's money.
How ONS calculates UK CPI
The Office for National Statistics tracks prices of ~180,000 goods and services each month. Items are weighted by typical household spending. The basket is updated annually to reflect changing spending patterns. CPI excludes owner-occupier housing costs; CPIH includes them.
Rule of 70 — time to halve purchasing power
Divide 70 by inflation rate to estimate when purchasing power halves. At 3%: 23 years. At 5%: 14 years. At 10%: 7 years. At 2022 peak UK inflation (11%): purchasing power would halve in just 6-7 years if sustained.
Real vs nominal amounts
Nominal: actual pound amount. Real: adjusted for inflation. A £40,000 salary in 2014 equals approximately £52,000 in 2026 to maintain the same purchasing power. When comparing historical amounts to today, always adjust using inflation indexes.
HistoryUK inflation history and historical CPI rates
Recent UK CPI inflation rates
| Year/period | UK CPI rate | Context |
|---|---|---|
| 12 months to June 2026 | 2.6% | Latest ONS reading (published 22 July 2026) |
| 2024 | 2.6% | Stabilising |
| 2023 | 7.3% (avg) | Declining through year |
| 2022 | 9.1% (avg, 11.1% peak) | 41-year high |
| 2021 | 2.6% | Post-COVID surge starting |
| 2016-2020 | 1.6% avg | Low inflation decade |
| BoE target | 2% | Government-set target |
Why UK inflation spiked 2021-2022
Supply chain disruption post-COVID, energy price shocks following Russia's invasion of Ukraine (UK wholesale gas prices rose 400%), and post-pandemic stimulus all contributed. UK inflation peaked at 11.1% in October 2022 — the highest since 1981.
Long-term UK inflation averages
1971-1980: averaged ~13% (oil shocks, wage spiral). 1980s: ~7%. 1990s: ~3%. 2000s: ~2%. 2010s: ~2.4%. Long-term since 1989: ~2.8%.
ProtectionHow to protect UK savings from inflation
Index-linked gilts (IL-bonds)
UK government bonds where both interest and capital adjust with RPI. Pays real yield plus inflation. Available in gilt funds via ISA or direct from DMO. Good for protecting lump sums but returns modest (real yields around 1-2%).
Equities — best long-term inflation hedge
FTSE All-Share has historically returned 7-8% nominal, 4-5% real after inflation. Companies can raise prices to match inflation, passing cost rises to customers. Equity ISAs with low-cost index funds offer tax-efficient inflation protection.
Property — real asset that tracks inflation
UK house prices have outpaced inflation by 3-5% annually over decades. Rental yields rise with inflation. Primary residences also offer inflation protection without capital gains tax on sale.
NS&I Index-Linked Savings Certificates
Tax-free index-linked savings from NS&I. They have been off sale to new customers for years, and since 2019 certificates renewed at maturity are index-linked to CPI rather than RPI — so the return is a little lower than it used to be, but it is still tax-free and still tracks inflation. Valuable if you already hold them.
Avoid long-term cash holdings
Beyond 3-6 month emergency fund, cash loses real value. At 2% savings rate with 3% inflation, you lose 1% per year in real terms — £10,000 becomes £9,900 worth in today's money.
Real examplesHow UK inflation affected purchasing power
What £1 from the past is worth today
| Year | Value of £1 in 2026 |
|---|---|
| 2020 | £1.26 |
| 2015 | £1.36 |
| 2010 | £1.48 |
| 2000 | £1.90 |
| 1990 | £2.72 |
| 1980 | £4.91 |
| 1970 | £17.20 |
Cost-of-living comparisons
UK average house 1985: £35,000. Equivalent in 2026: £105,000. Actual 2026 average: £290,000 — housing has massively outpaced general inflation. UK average wage 1985: £10,000. Equivalent 2026: £30,000. Actual: ~£38,000 — wages have outpaced CPI by 1% per year.
FAQ
Where these figures come from
Savings and interest figures on this page are drawn from The Bank of England (Bank Rate), HMRC (ISA and savings tax rules), the Financial Services Compensation Scheme (deposit protection), and the Financial Conduct Authority (consumer protection).
- Bank Rate (base rate) — Bank of England — The Interest Rate (Bank Rate).
- ISA annual allowance & rules — GOV.UK — Individual Savings Accounts (ISAs).
- Personal Savings Allowance — GOV.UK — Tax on savings interest.
- FSCS deposit protection (£120,000 per eligible person, per authorised firm — raised from £120,000 on 1 December 2025) — FSCS — Financial Services Compensation Scheme.
- CPI inflation — ONS — Inflation and price indices.
- Consumer money guidance — MoneyHelper — Savings.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Understanding your resultSelect the question that matches where you are right now.
Your result shows the projected growth or return based on the rate, contribution, and time period you entered — using standard compound or simple interest formulas.
What to do with itUse this to set savings targets, compare investment options, or understand the impact of starting earlier. Adjust the rate and timeframe to model optimistic and conservative scenarios.
What it is notNot a guaranteed return. Actual investment outcomes depend on market conditions, fees, taxes, and timing that cannot be predicted with certainty.
AccuracyUses standard financial formulas with the inputs you provided. Calculator arithmetic runs in your browser; the calculator code does not submit your figures to GlobalCalc to obtain a result.
Savings and investment results are dominated by three factors: the rate of return, the time horizon, and regular contributions. Compounding amplifies all three over time.
Compound growthReturns on returns accelerate growth over time. The difference between 5% and 7% over 20 years is much larger than the 2% gap suggests — compounding is non-linear.
Regular contributionsAdding even small regular amounts dramatically increases the final balance. £100/week invested at 7% for 20 years grows to over £110,000 in contributions and £110,000+ in returns.
Time horizonStarting 5 years earlier often produces a larger final balance than doubling your contribution rate. Time is the most powerful variable in savings calculations.
To improve your savings outcome, focus on starting earlier, increasing contributions, and minimising fees and tax drag on returns.
Start now, increase laterStarting with a small amount today and increasing over time beats waiting to start with a larger amount. Time in the market matters more than timing the market.
Minimise feesA 1% annual fee on a £100k balance costs £1,000/year and compounds against you. Compare fee structures across savings and investment products.
Use tax-advantaged accountsCash and stocks & shares ISAs, workplace and personal pensions, and the Personal Savings Allowance reduce the drag of tax on your returns — letting more of the growth compound for you.
Savings decisions connect to investment, tax, and retirement planning. Use these calculators to model the broader picture.
Set a savings goalWork backwards from a target amount to see how much you need to save each month.
Savings goal → Check compound growthModel how an initial investment grows with regular contributions over different time periods.
Compound interest → Factor in inflationSee what your future balance is worth in today's money after adjusting for inflation.
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| Inputs | Adjusted value | Note |
|---|---|---|
| £1,000 today at 2.6% for 10 years | £1,293 | about £1,293 — 22.6% of buying power gone |
| £1,000 in 2016 money at 2.6% (ten years back) | £774 | about £774 today |
| The 2022 peak rate held for five years | £1,546 | prices rise by more than half |
FAQFrequently asked questions
What is The Bank of England's inflation target?
2% CPI inflation, set by the UK government. The Bank of England's MPC adjusts Bank Rate to keep inflation near target. Bank Rate has been held at 3.75% since the MPC's June 2026 meeting.
How does inflation affect savings and investments?
Inflation reduces real value of cash. Investments that outpace inflation (equities, property, index-linked bonds) protect real wealth. Real return = Nominal return - Inflation.
What is the difference between CPI, RPI, and CPIH?
CPI: excludes housing costs (used for policy). CPIH: includes owner-occupier housing (most comprehensive). RPI: older measure, includes mortgage interest, and normally runs a little above CPI. In the 12 months to June 2026 CPI was 2.6%, CPIH 2.8% and RPI 3.0%. CPI is the primary UK measure.
Will UK inflation return to 2%?
The Bank of England forecasts inflation to stay near 2% through 2026-27, though risks remain from energy prices, wage pressures, and global supply disruptions. CPI was 2.6% in the 12 months to June 2026, down from 2.8% in the 12 months to May.
How do I calculate real return on savings?
Real return ≈ Nominal rate - Inflation rate. 5% ISA with 3% inflation = 2% real return. For precision: (1 + nominal)/(1 + inflation) - 1.
Does the State Pension keep up with inflation?
Yes — the triple lock ensures state pension rises by the highest of CPI, wage growth, or 2.5% each April. Effectively pension increases match or exceed inflation over time.
The sources behind this calculator
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- MoneyHelper (UK Government-backed) — the UK's free money guidance service
Last checked: July 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.