Question 1

What does purchasing power mean?

Accepted Answer

Purchasing power is the real value of money  -  how much a given amount can actually buy. Inflation erodes purchasing power over time: if inflation is 3%, a £1,000 item this year costs £1,030 next year. Someone earning the same salary in both years is effectively 3% worse off in real terms. The purchasing power calculator converts nominal amounts between years so you can compare like for like.

Question 2

How much has the cost of living gone up since 2020?

Accepted Answer

UK cumulative CPI inflation from 2020 to 2025 was roughly 25–27%, meaning something that cost £100 in 2020 cost around £125–127 by 2025. The spike was concentrated in 2022–2023 when energy and food prices surged. Use the calculator above to find the exact figure for any amount and year range.

Question 3

Why was UK inflation so high in 2022–2023?

Accepted Answer

UK CPI inflation hit 11.1% in October 2022  -  the highest in over 40 years. The main drivers were the post-COVID recovery in demand meeting constrained supply chains, Russia's invasion of Ukraine pushing up energy and food prices globally, and tight labour markets pushing wages higher. The Bank of England raised interest rates from 0.1% in December 2021 to a peak of 5.25% in August 2023 to bring inflation back to its 2% target.

Question 4

What is the difference between CPI and RPI?

Accepted Answer

CPI (Consumer Price Index) is the Bank of England's official inflation target measure and the most widely reported figure. RPI (Retail Price Index) is an older measure that includes mortgage interest payments and tends to run higher than CPI. CPIH adds owner-occupiers' housing costs to CPI. For most everyday purposes, CPI is the relevant measure. RPI is still used for index-linked gilts, some rail fares, and older pension schemes.

Question 5

Which inflation measure does this calculator use?

Accepted Answer

This calculator uses the UK Consumer Price Index (CPI), which is the Bank of England's target measure and the most widely reported figure. CPI measures the price of a representative basket of goods and services. Note that CPIH (which includes owner-occupiers' housing costs) and RPI (Retail Price Index, an older measure) give slightly different results and are used for different purposes  -  RPI is higher than CPI over most periods.

Question 6

How does inflation affect savings?

Accepted Answer

Inflation silently erodes savings held in low-interest accounts. If your savings account pays 2% interest but inflation is running at 3%, the real value of your savings is falling by 1% a year — even though the cash balance is growing. To protect savings from inflation, the interest rate needs to exceed the CPI rate. ISAs, premium bonds and high-interest easy-access accounts are common ways UK savers try to keep pace.

Question 7

What was the average UK inflation rate over the last 10 years?

Accepted Answer

From 2015 to 2024, UK CPI averaged roughly 3–3.5% per year, but with significant variation — below 1% in 2015–2016, around 2–3% in 2017–2019, low in 2020, then spiking to 9–11% in 2022–2023 before falling back. The Bank of England's official target is 2% per year. Use the calculator above to see the exact cumulative effect over any period.

UK Inflation Calculator — What Would £X Be Worth in Any Year?