Why the gap between what you put in and what you get out is so large
Over a long plan most of the final value is growth rather than contributions, and the crossover comes later than people expect. For the first several years the balance is mostly your own money; the compounding only starts to dominate once the balance is large enough for the returns on it to exceed what you are adding.
That is the argument for starting early rather than investing more: the early instalments are the ones with time to compound, and no later increase substitutes for them.
What this does not account for
Fund charges, exit loads, and tax on gains all reduce the real outcome, and none of them is included here. Nor is the fact that real returns arrive unevenly - a plan that averages 12% by returning -20% and then +30% ends up somewhere different from one that returns 12% every year.
Frequently asked questions
- Is the return guaranteed?
- No, and this is the most important thing on the page. The return is a figure you enter, not a rate anyone is paying you. A market-linked plan can return less than assumed, and can return less than you put in. Treat the result as an illustration of what a rate would do, not as a projection of what will happen.
- What does the step-up do?
- It increases your monthly amount by a fixed percentage each year, which is what people usually do as their income rises. It changes the result far more than most expect - a 10% annual step-up over twenty years can roughly double the final value.
- How is the monthly return derived from the annual one?
- As the twelfth root of the annual growth, so twelve months compound back to exactly the annual figure. Dividing the annual rate by twelve, which some calculators do, overstates the result.
- How accurate is this?
- The arithmetic is exact and uses decimal rather than floating-point maths, so results are not skewed by rounding. Where a calculation depends on legislation, the page shows which rule year it used, when those rules were last checked and the official source they came from. Results are estimates for information, not advice.
- Are my figures sent anywhere?
- No. Every calculation runs inside your browser. Nothing you type - salary, income, dates or amounts - is sent to our servers, stored or logged. You can disconnect from the network after the page loads and the calculator keeps working.