PF
Pennywise Finance Editorial
UK personal finance team. Standard compound-interest formula, monthly compounding, 2026/27 illustrations.
Fact-checked
Reviewed August 2026

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Your numbers

£
£
%
Cash: 4-5%. Global equity long-run: 6-8%.

Your projection

Total contributions£49,000.00
Interest earned£45,000.00
Final balance£94,000.00
Interest as % of total48%

How compound interest works

Compound interest is interest paid on both your original balance AND the interest already earned. Over decades this "interest on interest" becomes the majority of your final balance — often two or three times what you contributed.

Example: £200/month at 6% for 30 years:

The formula

We use the standard future value of a series with monthly compounding: FV = P(1+r/12)^(12n) + PMT × (((1+r/12)^(12n) − 1) / (r/12)) — where P is starting balance, PMT is monthly contribution, r is annual rate, n is years.

Rates to use

Product typeRealistic long-run rate
UK easy-access savings3–5% (variable)
UK fixed-rate bonds4–5%
Global equity index tracker6–8% (real, long-run)
Balanced 60/40 portfolio4–6%
UK cash ISA3–5% (tax-free)

Real UK growth examples

£100/month at 6% for 40 years (starting age 25): ~£197,000

£100/month at 6% for 20 years (starting age 45): ~£46,000

Same £48,000 total contributed — different starting ages. Time in market matters more than amount contributed.

Related guides

Related calculators

Projections use a fixed annual rate for illustration. Real markets don't return the same rate every year. Capital at risk for equity investments. General information only, not personalised advice.