Foundations · Explainer
Compound interest explained: the formula, AER, inflation and charges
Compound interest is interest earned on interest, and it works for savers, against borrowers and in reverse through charges and inflation. For illustration, £10,000 at 5% a year compounds to about £43,219 over 30 years, against £25,000 with simple interest. CPI inflation was 3.5% in September 2026.
