Inflation Calculator

How far will your savings go in retirement?

A rise in inflation happens when the price of goods such as food, transport and living costs, like electricity, rise. Changes to inflation not only impact what you can afford today but also what you can afford in the future. Savings like your pension aren’t immune to these changes and if your pension value remains the same, this decreases your purchasing power in the future, which over time could mean that your pension savings might not get you as far as you’d hoped.

How far could your pension take you in retirement?

Use our inflation calculator to find out how your pension could be impacted.

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What is inflation?

Inflation is the rate at which the cost of everyday things like food, transport and electricity increases over time. The rise in prices, often presented as a percentage, means that a unit of money essentially buys less than it did previously. Over time, this reduces your purchasing power as your money doesn’t spread as far as before.

For example, if you buy a pint of milk for £1 today and inflation jumps to 10%, next year the same pint will cost you £1.10, and then if inflation sticks at 10%, it will cost you £1.21 the year after.

How could inflation impact my pension pot value?

The effect of inflation is most noticeable when you’re looking at large sums of money, such as your pension pot. For example, if your pension pot is worth £50,000 today, to keep up with inflation and maintain the same purchasing power in 10 years time, with an assumed inflation rate of 2.5% per year, you’d need to have £64,004.23 in your pot. This means over those 10 years you’d need to either contribute or have investment growth of an additional £14,004.23 in order to have the same purchasing power as today.

Input your details below to find out how inflation could impact your pension pot. These calculations are for illustrative purposes only.

See how inflation will impact your pension value
Guidance on the minimum, moderate and comfortable living standards can be found below this calculator. To find out more about how much you currently have in your pension pot, you can review your latest statements.

If you contribute annually to your pension pot, this may offset the effects of inflation. You can input your current annual contributions here. The calculator doesn’t automatically add any tax relief which you may be entitled to for these contributions.

The calculator assumes investment growth of 5% and pension fees of 0.7% each year. Investment returns aren’t guaranteed.
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Pension Pot
Today's Money
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The total estimated value of your pension pot including net inflation
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A pint of beer
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A litre of petrol
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A loaf of bread
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1 month’s rent
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As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Standards of living in retirement

The Pensions and Lifetime Savings Association's (PLSA) Retirement Living Standards indicate the amount of annual income required to achieve certain lifestyles in retirement:

Minimum for basics
£14,400 a year for one
£22,400 for a couple

This covers all the essentials, with some disposable income left over. It allows one long weekend and one week-long holiday in the UK each year. There's a £630 budget for clothing and shoes per year, and you could afford some small home DIY improvements like decorating one room.

Moderate for more flexibility
£31,300 a year for one
£43,100 for a couple

This amount offers some more flexibility. You could treat yourself to meals out a few times a month, enjoy a fortnight abroad in Europe, plus a long weekend away in the UK. You could spend £1500 per year on clothes and shoes and even replace a three-year-old car every 7 years. You'd be able to get some help with home improvements and decorating rather than relying on DIY.

Comfortable for some luxuries
£43,100 a year for one
£59,000 for a couple

A comfortable lifestyle could let you regularly dine out and spend three weeks abroad in Europe per year. The clothing and footwear budget is £1,500 each year, cars can be replaced every five years and kitchens and bathrooms every 10-15 years.

Inflation calculator FAQs

What causes inflation?

1. Demand-pull effect – this is when an increase in spending power increases the demand for goods and/or services. This increase in demand then leads to a rise in price.

2. Cost-push effect – when production costs increase, there’s a need to increase the total price of the goods being sold.

3. Built-in inflation – this type of inflation occurs when the natural rise of costs is reflected by a rise in salary or wages. An increase in wages means someone can purchase more with their money, and the cycle continues.

What is the projected rate of inflation?

When using our inflation calculator, you’ll notice that we’ve included an assumed annual rate of inflation of 2.5% in your pension projection. 2.5% is the assumed annual rate of inflation used by the Financial Conduct Authority (FCA).

Though inflation rates will fluctuate year to year, over time they will generally stabilise. A period of inflation may be followed by a period of deflation, when prices decrease and purchasing power increases, such as in 2009 when the UK experienced its first fall in prices in nearly 50 years. A projected annual inflation rate of 2.5% means that the purchasing power of your pension pot reduces by 2.5% each year until you retire. By factoring in this rate of inflation, the projected value of your pension at retirement is shown in real terms and in accordance with the number of years you’ve got left to save. In other words, how much your projected pension amount would be worth today.

How do rising inflation rates affect pension funds?

Pensions aren’t immune from the effects of inflation, both when you’re saving into your pension and when it comes to drawing down in retirement. The money paid into your pension is invested in different asset classes and their value can decrease as well as increase over time. However, for each year that your pension is eroded by inflation, its potential for growth is impacted. For example, if your pension pot value grew by 5%, but inflation was at 2.5%, ultimately your pension would have grown by just 2.5%.

When it comes to retirement, you’ll want to be supported by your pension for as long as possible. The impact of inflation on your pension will depend upon how much you’ve saved, and how you plan to access your money.

As a long-term investment, intermittent ups and downs don’t usually have a lasting impact on pensions as most savers will have plenty of time to ride out these bumps, and benefit from the long-term growth opportunities. But for those closer to retirement, a pension has less time to recover from these losses. This is why it’s important that savers take a balanced approach when looking at how best to protect lifetime savings.

How much income do I need in retirement?

For many people, an annual retirement income that’s two-thirds of their current salary is a reasonable amount to retire on. This means that if your annual salary is currently £35,000, then just over £23,000 per year would give you a sensible retirement income. You can also refer to the Retirement Living Standards from the PLSA for guidance.

If you’re likely to be eligible for the Full State Pension, you’d currently receive £11,500 per year (2024/25). This should be factored into the total value of your pension pot. Currently, all savers can claim their State Pension from the age of 66. However, this is set to increase to 67 by 2028.

To find out more about how much value existing workplace and personal pensions could generate in retirement, you can explore our pension calculator, which also allows you to take the State Pension into account.


To build the Pension Inflation Calculator, we created a formula that looks at any given pension pot value and applies an assumed 5% annual investment growth and static yearly contributions to generate its estimated future value at retirement.

To show the impact of inflation on savings, we replicated this formula to also apply a chosen static rate of annual inflation to highlight how much the estimated future pension pot will be worth in today’s money.

Both formulas subtract an assumed 0.7% from the annual investment growth each year to account for yearly pension fees.

The inflation rate a user inputs also generates the future price of goods, like milk and bread.

Using government and ONS data, we attained the average price of milk, bread, beer, petrol and diesel.

Using Zoopla’s Rental Market Report, we attained the average cost of renting in the UK.

The average cost of one pint of pasteurised milk:

The average cost of an 800g sliced white loaf of bread:

The average cost of one pint of draft lager:

The average cost of one litre of petrol and diesel using the average price between 26 September to 17 October:

Average monthly rent for a 1-4 bed property based on July 2022:

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