Figures are illustrative only, ignore charges and tax, and are not a forecast or personal recommendation.
Inflation is the general rise in prices over time, which means a fixed sum of money buys progressively less as years pass. This calculator shows two sides of that effect for any amount, inflation rate, and number of years: what it would cost in the future to buy what that amount buys today, and what today's amount would be worth in terms of future purchasing power.
Two ways of looking at the same effect
"Cost of today's basket in the future" answers: if something costs £X today, what will an equivalent item cost after N years of inflation? This figure grows larger than the original amount. "Future purchasing power of this amount" answers a related but different question: if I have £X and simply hold it (in cash, earning no return) for N years, what will it be able to buy in today's terms? This figure shrinks. Both use the same compounding formula, just applied in opposite directions, and the gap between the original amount and the purchasing-power figure is the "value eroded" shown as a third result.
Worked example
At an assumed 2.5% average annual inflation rate, £10,000 today would need to become roughly £16,400 in 20 years just to buy the same goods and services — or, looked at the other way, that same £10,000 held in cash for 20 years would be worth only around £6,100 in today's purchasing power terms. This is why holding large cash balances for long periods, even in an interest-paying account, can quietly lose real value if the interest rate doesn't keep pace with inflation — a point explored in our comparison of Cash ISAs versus Stocks & Shares ISAs.
Why 2-3% is a common assumption
The Bank of England targets 2% CPI inflation over the medium term, though actual inflation has varied well above and below that target at different points, including periods of considerably higher inflation in recent years. Many long-term financial plans use a cautious assumption somewhere in the 2-3% range, while acknowledging that any specific future period could run meaningfully hotter or cooler than that.
Applying this to savings specifically
If you're specifically interested in how inflation affects a cash savings balance rather than a hypothetical amount, our dedicated Inflation Erosion Calculator frames the same calculation around a savings pot, and our “What will £100,000 be worth in 20 years?” calculator provides a simple, adjustable visualisation of the same effect on a round-number sum.
Frequently asked questions
Does this account for interest earned on the money?
No — this calculator shows the effect of inflation alone, assuming the money earns no return. To see the combined effect of investment growth and inflation together, first project growth with our Compound Interest Calculator, then apply this inflation calculator to the resulting figure.
What inflation rate should I use for long-term planning?
There's no way to know future inflation with certainty. Many planners use a long-run historical average (often 2-3% for the UK) while stress-testing plans against higher rates as well.
Is inflation the same for everyone?
No — official inflation measures like CPI track a representative "basket" of goods and services, but any individual's actual cost of living can rise faster or slower depending on their specific spending patterns.
How does inflation affect investments, not just cash?
Investment returns are also affected by inflation in the sense that "real" (inflation-adjusted) returns are what matters for future purchasing power — a 6% investment return in a 4% inflation environment provides a much smaller real gain than the same 6% in a 1% inflation environment.
Common mistakes when thinking about inflation
A frequent mistake is assuming a single official inflation figure (such as the headline CPI rate) applies equally to everyone's personal spending. In reality, if your own spending is weighted more heavily toward categories rising faster than the average — energy or housing costs during certain periods, for example — your personal experience of inflation can run meaningfully higher than the published national average, and vice versa if your spending leans toward categories with slower price rises.
A second mistake is using a single static inflation assumption for a very long projection (30+ years) without acknowledging how much uncertainty that involves. Inflation has varied enormously across different multi-decade periods in UK history — it's more robust to test a plan against a couple of different inflation assumptions (a low and a higher one) rather than relying on one fixed figure for a projection spanning several decades.
What's the difference between CPI and RPI inflation measures?
CPI (Consumer Prices Index) is the UK's main official inflation measure and the Bank of England's target measure; RPI (Retail Prices Index) uses a different, older methodology and has historically tended to run somewhat higher — always check which measure a figure you're using is based on before comparing it with another source.
Does inflation affect my mortgage?
Not directly on a fixed-rate mortgage, since the monthly payment stays the same in nominal terms even as inflation erodes its real cost over time — which is one reason existing fixed-rate mortgage debt can become easier to service in real terms during a high-inflation period, though this doesn't apply if you're on a variable rate that tends to rise alongside interest rates set to combat inflation.
How is CPI inflation actually measured?
The Office for National Statistics tracks the price of a representative "basket" of hundreds of goods and services bought by typical UK households, updated periodically to reflect changing spending habits, and calculates the percentage change in the overall cost of that basket over time.
Can inflation ever be negative?
Yes — this is called deflation, where the general price level falls rather than rises. It's historically been rare and generally short-lived in the UK, and while it sounds beneficial for savers, sustained deflation is usually associated with weak economic conditions.
One practical use of this calculator is sense-checking a long-term savings or investment goal expressed in today's money — if you're aiming for a target sum in 20 or 30 years, run that target through this calculator to see what an equivalent amount would need to be in future pounds to have the same real purchasing power, then plan contributions around the inflated figure rather than the original one.