How to Work Out What Your Money Is Worth
To adjust an amount for inflation, multiply it by the ratio of the two years' price indices.
The UK's official measure is CPI, published monthly by the ONS. If prices have risen 30% since your starting
year, then £100 back then buys what £130 buys now, so your money has lost purchasing power even though the
number in your account has not changed.
Today's value = original amount × (today's CPI ÷ CPI in that year)
This is why a "pay rise" below the inflation rate is really a pay cut in what you can actually buy.
CPI, CPIH or RPI: which one applies to you
The UK publishes several inflation measures and they give different answers, which matters when a number is
written into a contract.
| Measure |
What it covers |
Where you meet it |
| CPI | Goods and services, excluding most housing costs | The headline rate, Bank of England 2% target, State Pension triple lock, benefits uprating |
|---|
| CPIH | CPI plus owner-occupier housing costs and council tax | The ONS preferred measure, usually the most representative of real household costs |
|---|
| RPI | Older measure, includes mortgage interest, known to overstate | Rail fares, some index-linked gilts, older commercial leases, student loan interest |
|---|
RPI typically runs around 0.8 to 1 percentage point above CPI. It is no longer a National Statistic, and from
2030 it is being aligned with CPIH, but it still governs plenty of existing contracts, so always check which
measure a rise is actually tied to.
Why inflation quietly shrinks savings
If your savings account pays 3% and inflation is 4%, you are losing 1% a year in real terms even though the
balance is growing. £10,000 left in a low-paying account for a decade at 3% inflation keeps its number but
loses roughly a quarter of its purchasing power. That is the argument for using your
ISA allowance and, for long horizons, for
investing rather than saving. It also cuts the other way on
debt: fixed-rate borrowing gets cheaper in real terms as inflation erodes what you owe.
Check your pay rise against it. A 3% rise when inflation is 4% is a
1% real-terms pay cut. Work out what you would need to stand still with the
pay rise calculator, and see the effect on take-home pay with the
salary calculator.
Inflation Calculator FAQs
How does inflation affect savings in the UK?
Inflation erodes the real purchasing power of savings. If your savings account pays 3% but inflation is running at 5%, your money loses 2% of its real value each year. During 2022–2023, many easy-access accounts paid under 1% while CPI exceeded 10% · causing significant real-terms losses. To protect savings, look for accounts beating the current inflation rate, maximise your Cash ISA, or consider inflation-linked products such as Premium Bonds or index-linked gilts.
What was the UK inflation rate in 2023 and 2024?
UK CPI averaged around 7.3% in 2023, having peaked at 11.1% in October 2022 · the highest in 41 years. By the end of 2023 it had fallen to around 4%, and continued declining through 2024 back toward the Bank of England's 2% target. The surge was driven by energy prices, post-pandemic supply disruptions, and strong wage growth.
How can I protect my savings from inflation in the UK?
Key strategies include: choosing high-interest savings accounts or Cash ISAs that beat the current CPI rate; using Premium Bonds (prize fund rate linked to interest rates); considering Stocks and Shares ISAs for long-term real returns above inflation; investing in property or index-linked gilts; and avoiding holding excess cash in low-rate current accounts. Review your savings rates regularly · banks are slow to pass on rate rises to existing customers.
What is the difference between RPI and CPI in the UK?
CPI (Consumer Price Index) is the Bank of England's target measure, covering a basket of goods and services but excluding housing costs. RPI (Retail Price Index) includes mortgage interest payments and housing costs, so it is generally higher than CPI. RPI is still used for some purposes including student loan interest, rail fare increases, and index-linked gilts. The ONS considers RPI a flawed measure and no longer classifies it as a National Statistic.
For informational purposes only · CPI data is approximate · Source: ONS estimates