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ISA · SIPP · FTSE 100 · Premium Bonds

UK Compound Interest Calculator

Free compound interest calculator in pounds sterling. Model Stocks & Shares ISA, Cash ISA, SIPP, and FTSE 100 growth. Set currency to GBP and use 6–7% as a real return rate for diversified equity ISAs.

By Snowballr Research Team
Last reviewed June 15, 2026Fact-checked against primary sourcesEditorial standards
Coverage: Compound interest · Retirement · FIRE · Debt payoff · Mortgages · Fraud prevention
Built from: IRS · FINRA · SEC · BLS · Federal Reserve · Freddie Mac30+ primary sources verified
Quick answer · 4 UK scenarios
£500/mo Stocks & Shares ISA at 7% for 30 yrs
= £610,000 · £180K contributed · £430K from compounding · tax-free
£20K/yr (full ISA) at 7% for 20 yrs
= £874,000 · £400K contributed · £474K compounding
£800/mo SIPP (= £1,000 gross) at 7% for 25 yrs
= £759,000 · only £240K out of pocket · 20% relief baked in
£10K Cash ISA at 4.5% AER for 5 yrs
= £12,461 · pure principal compounding · no contributions

Key UK terms (used throughout this page)

Stocks & Shares ISA
UK tax-free wrapper. £20K/year allowance. Equity gains and dividends compound free of income, dividend, and capital gains tax.
SIPP
Self-Invested Personal Pension. 20–45% tax relief on contributions; tax-free growth until age 55 (rising to 57 in 2028).
AER
Annual Equivalent Rate — UK equivalent of APY. Used on Cash ISAs and savings accounts so you can compare like-for-like.
Accumulation share class
Fund variant that automatically reinvests dividends instead of paying out. The cleanest way to compound inside an ISA.

UK investing accounts and how they compound

For UK savers, compound interest math is the same as anywhere else — the difference is the tax wrapper. Stocks & Shares ISAs, Cash ISAs, and SIPPs all shelter returns from income tax, dividend tax, and capital gains. Outside these wrappers, dividends above £500 (2025/26) and gains above £3,000 are taxable, which materially reduces effective compounding.

Stocks & Shares ISA: the workhorse

The Stocks & Shares ISA is the most powerful compounding tool for UK retail investors. Up to £20,000/year goes in (full allowance), grows tax-free, and comes out tax-free at any age. Reinvested dividends compound automatically in accumulation share classes. The math:

  • £500/month at 7% real return for 10 years → £86,400
  • £500/month at 7% real return for 20 years → £260,000
  • £500/month at 7% real return for 30 years → £610,000
  • £500/month at 7% real return for 40 years → £1.31M

SIPP (Self-Invested Personal Pension)

SIPPs add a 20% tax relief on contributions (40% or 45% for higher-rate taxpayers), effectively boosting your input. A £800 net contribution becomes £1,000 in the pension. Compound that for 30 years at 7% and the tax relief alone produces an extra ~£75,000 vs identical taxable investing. SIPPs lock funds until age 55 (rising to 57 in 2028).

Cash ISA vs Stocks & Shares ISA

Cash ISAs currently pay 4–5% AER (Annual Equivalent Rate) with daily compounding. Stocks & Shares ISAs target 6–8% but with volatility. Over any 10+ year period since 1900, UK equities have beaten cash. For shorter horizons (under 5 years), Cash ISA is the right tool; for retirement-distance savings, Stocks & Shares wins.

FTSE 100 vs global equity

The FTSE 100 has underperformed global equity indices (MSCI World, FTSE All-World) for two decades, returning about 5–6% real annually vs 7–8% for global. Most modern UK investors use a global tracker (Vanguard FTSE All-World, HSBC FTSE All-World Index) inside their ISA rather than UK-only exposure. Set 7% real return in our calculator for global, 6% for UK-heavy.

Inflation and real returns in the UK

UK CPI inflation has averaged 2–3% long-term, with spikes (2022 hit 11%). When projecting compound growth, use real returns (after inflation): roughly 6–7% for global equities, 4–5% for UK-heavy, 0–2% for cash. Our calculator shows both nominal and inflation-adjusted balances side-by-side.

Premium Bonds: the special case

Premium Bonds don't compound traditionally. NS&I uses a monthly prize draw with an average return rate (currently ~4.4% tax-free). Your £1 bond stays £1 forever — no growth, just prize chances. For risk-averse savers in the 40%+ tax bracket, Premium Bonds beat taxable savings up to the £50,000 holding limit. But they lose to a Cash ISA or Stocks & Shares ISA in expected value for most situations.

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Methodology & sources

  • ISA allowance and tax rules: HMRC — Individual Savings Accounts (ISAs) guidance, 2025/26
  • SIPP tax relief: HMRC — Pension tax manual, 2025
  • FTSE 100 long-term return: Barclays Equity Gilt Study (most recent edition)
  • Premium Bonds prize rate: NS&I current rate disclosure
  • Long-run inflation: ONS CPI series

Related

FAQ

How much is the UK ISA allowance?

£20,000 per adult per tax year (2025/26). Lifetime ISA cap is £4,000 of the total.

What return should I assume for a UK ISA?

6–7% real for a diversified global equity ISA, 4–5% nominal for a Cash ISA, ~4.4% tax-free for Premium Bonds.

Does compound interest work the same in pounds vs dollars?

Yes — the math is currency-independent. The differences are tax wrappers (ISA/SIPP), available rates, and inflation. Use the correct currency setting in our calculator for accurate formatting.

Why this calculator and not the others?

Snowballr publishes six compound-interest variants because the math is the same but the conventions, defaults, and product context differ. Here's where this one fits and when to switch to another.

You're using:
UK compound interest calculator
Best for: GBP-denominated savings: Cash ISA, Stocks & Shares ISA, easy-access savings. Defaults assume UK Bank Rate context (2026 BoE base 4.25%) and £20,000 annual ISA allowance.
A = P(1 + r/12)^(12t) — same math, GBP labels + ISA-aware copy
Switch away if: USD or EUR scenarios — use General. Pension SIPP modeling needs the Retirement calculator (UK pension tax relief differs).
Backed by our research: 10,000 deterministic Monte Carlo scenarios — methodology, percentile distribution, and the year interest beats contributions.
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