Index fund calculator
The index returned one number and your money grew at another. This works out every rate in between, and what each is worth.
Calculator
The gap between the index and your pot
From the index to your pot, one rate at a time
The index returns 7.00% on its level, which with dividends is 9.14%. Your money compounds at
8.98%
a year — before the platform fee, which comes out of the pot rather than out of the return.
Over 25 years that is £487,830.05 against £524,424.24 at the index’s own total return with nothing taken out — a gap of £36,594.19, or 6.98% of it.
| Step | Rate after it | Worth over the term |
|---|---|---|
| The index figure you gave | 7.00% | — |
| Plus dividends the index level leaves out | 9.14% | -£143,049.48 |
| Less the tracking gap | 9.09% | £4,411.84 |
| Less the fund’s ongoing charge | 8.98% | £8,871.04 |
| Less the platform fee | 8.98% | £22,514.83 |
The last two rows share a rate, and that is not a mistake. A platform fee is deducted from the pot rather than taken out of the return, so it does not change what the money compounds at — it changes how much of it there is. Inventing an equivalent percentage for it would be the collapse of two different charges into one number that this site refuses everywhere else.
Rates multiply; they do not add. A 7.00% index paying 2.00% returned 9.14%, not 9.00%. The difference is the dividend earned on the year’s own growth, it is small in one year, and a projection compounds it for the whole term. Every rate on this site is composed the same way.
The largest step is usually the one that makes the fund look better. An index level excludes dividends and a fund receives them, so a reader comparing their statement against a headline is comparing two different series. That is why the basis selector sits directly under the index box rather than in an advanced section.
This is not a forecast. It is what would happen if one rate held exactly, every period, for 25 years. Real index returns arrive as a sequence, the order changes the answer, and nobody — including this page — can tell you what an index will do. You typed the rate.
Accumulation units or income units
Accumulation or income units? Before costs and tax, it makes no difference at all. Accumulation units roll the fund’s income back into the unit price. Income units pay it out as cash and you buy more units with it. Reinvested at the same price those are the same holding with the same return, which is why this calculator models one rate and not two: the growth assumption above is a total return, income included, whichever unit class produces it.
Three things do differ, and none of them is the return.
- Friction. Reinvesting a distribution is an act. Where it is automatic and free, accumulation and income units are indistinguishable. Where it is a manual purchase that carries a dealing charge — which is the ordinary case for an exchange-traded fund — it is a real cost that accumulation units avoid entirely. The ETF calculator prices a per-order dealing charge.
- Cash that sits. A distribution paid in April and reinvested in June was out of the market for two months. Nothing in this projection represents that, because it assumes every penny stays invested throughout.
- Tax, and only outside a wrapper. The income is taxable in the year it arises whichever units you hold — including accumulation units, where nothing is paid out. The often-repeated idea that accumulation units defer the tax is wrong; what they make harder is the record-keeping, because the reinvested income adds to what the units cost you and a disposal that ignores it is taxed twice on the same money.
This calculator applies no tax at all. The stocks and shares ISA calculator prices what a wrapper is worth — the dividend tax year by year and the capital gains tax on disposal — against figures that have been checked against gov.uk and dated. Nothing statutory is computed here, which is why this page carries no such stamp.
Year by year
| Year | Opening | Paid in | Growth | Platform fee | Closing |
|---|---|---|---|---|---|
| 1 | £10,000.00 | £4,800.00 | £1,126.73 | £32.89 | £15,893.84 |
| 2 | £15,893.84 | £4,800.00 | £1,655.18 | £48.32 | £22,300.70 |
| 3 | £22,300.70 | £4,800.00 | £2,229.61 | £65.08 | £29,265.23 |
| 4 | £29,265.23 | £4,800.00 | £2,854.03 | £83.30 | £36,835.96 |
| 5 | £36,835.96 | £4,800.00 | £3,532.81 | £103.10 | £45,065.67 |
| 6 | £45,065.67 | £4,800.00 | £4,270.68 | £124.63 | £54,011.72 |
| 7 | £54,011.72 | £4,800.00 | £5,072.77 | £148.08 | £63,736.41 |
| 8 | £63,736.41 | £4,800.00 | £5,944.67 | £173.51 | £74,307.57 |
| 9 | £74,307.57 | £4,800.00 | £6,892.48 | £201.19 | £85,798.86 |
| 10 | £85,798.86 | £4,800.00 | £7,922.77 | £231.25 | £98,290.38 |
| 11 | £98,290.38 | £4,800.00 | £9,042.77 | £263.94 | £111,869.21 |
| 12 | £111,869.21 | £4,800.00 | £10,260.25 | £299.48 | £126,629.98 |
| 13 | £126,629.98 | £4,800.00 | £11,583.68 | £338.08 | £142,675.58 |
| 14 | £142,675.58 | £4,800.00 | £13,022.30 | £380.09 | £160,117.79 |
| 15 | £160,117.79 | £4,800.00 | £14,586.16 | £425.73 | £179,078.22 |
| 16 | £179,078.22 | £4,800.00 | £16,286.14 | £475.36 | £199,689.00 |
| 17 | £199,689.00 | £4,800.00 | £18,134.06 | £529.29 | £222,093.77 |
| 18 | £222,093.77 | £4,800.00 | £20,142.87 | £587.92 | £246,448.72 |
| 19 | £246,448.72 | £4,800.00 | £22,326.51 | £651.66 | £272,923.57 |
| 20 | £272,923.57 | £4,800.00 | £24,700.23 | £720.93 | £301,702.87 |
| 21 | £301,702.87 | £4,800.00 | £27,280.54 | £796.25 | £332,987.16 |
| 22 | £332,987.16 | £4,800.00 | £30,085.48 | £878.12 | £366,994.52 |
| 23 | £366,994.52 | £4,800.00 | £33,134.54 | £967.11 | £403,961.95 |
| 24 | £403,961.95 | £4,800.00 | £36,449.01 | £1,063.86 | £444,147.10 |
| 25 | £444,147.10 | £4,800.00 | £40,051.95 | £1,169.00 | £487,830.05 |
25 years, rolled up from monthly periods. The CSV export contains every period, not just the year ends.
A worked example you can check
These are the figures the calculator above loads with, so every number in this section can be checked against it without typing anything. £10,000.00 invested, £400.00 a month, over 25 years. The index is assumed to return 7.00% on its level and to yield 2.00%; the fund charges 0.10% with a 0.05% tracking gap beyond that, and the platform charges 0.25%.
| The index’s level return, as given | 7.00% |
|---|---|
| With dividends — the total return a fund actually tracks | 9.14% |
| What the pot compounds at, after the gap and the ongoing charge | 8.98% |
| Adding the dividends is worth | -£143,049.48 |
| The tracking gap costs | £4,411.84 |
| The ongoing charge costs | £8,871.04 |
| The platform fee costs | £22,514.83 |
| Final value after 25 years | £487,830.05 |
Three things in that table are worth pausing on.
- 7.00% plus 2.00% is 9.14%, not 9.00%. Rates compose multiplicatively — the missing part is the dividend earned on the year’s own capital growth. It looks like nothing in a single year and a projection compounds it for 25.
- The dividends are the biggest term, and they go the other way. They are worth £143,049.48 here, against £8,871.04 for the ongoing charge. A reader comparing their statement against a headline index figure is comparing two different series, and the difference is larger than everything the fund charges them.
- The platform fee changes no rate at all. It is deducted from the pot rather than taken out of the return, so it appears in the schedule’s fee column instead — which is why the last two rows of the chain on the calculator share a rate. Two different mechanisms; two different places to look for them.
Methodology: exactly what this calculator does
The chain, in order
Four rates stand between an index and a pot, and this calculator applies them one at a time: the index’s level return, the dividends the level excludes, the tracking gap, and the fund’s ongoing charge. Each is composed multiplicatively — (1 + a) × (1 + b) − 1 — never added. A 7.00% index paying 2.00% returned 9.14%, and the difference from the additive shortcut is the dividend earned on the year’s own growth. It is the same rule the ongoing charge follows and for the same reason.
The last of the four is applied by the projection engine rather than by this page, and the delivered rate on screen is read back off the engine rather than computed a second time. A page that worked it out separately would have two answers to one question, agreeing until the day a rounding rule changed.
Price return against total return
The level of an index is the price of its constituents. It excludes the dividends those companies pay, and almost every index figure quoted in the press or drawn on a chart is that level. A fund holds the shares, receives the dividends and tracks the total return version instead — a different series, higher by roughly the yield every year.
So the single most common way to conclude that a tracker is doing badly is to compare it with the wrong series. The basis selector on the calculator is directly under the index box for that reason, and on the total-return basis the yield is ignored entirely rather than added to a figure that already contains it.
The tracking gap, and why it is not the OCF
The industry’s published tracking difference is the fund’s return less the index’s, and it already contains the ongoing charge. The box on this page is what remains after the ongoing charge has been accounted for, so that the two are not counted twice: sampling rather than full replication, cash waiting to be invested, the fund’s own dealing costs, less securities-lending revenue and any advantage in how dividends are taxed at source.
It is signed, and negative is not unusual — a fund can beat its index net of its own charge. That is also why it is composed into the growth rate rather than passed to the engine as a fee: a fee cannot be negative, correctly, because a fund cannot pay you to hold it.
Where each cost is taken from
The dividends, the tracking gap and the ongoing charge are all rates: they change what the money compounds at, and none of them appears as a deduction anywhere. The platform fee is not a rate in that sense at all — it is charged on the value and deducted from the pot, so it is the only charge visible in the fee column of the table. That is exactly where a fund investor meets each of them, and it is why the chain is expressed in rates and the schedule in pounds.
The rate reaching the engine is always legal
A projection cannot express a total loss as a growth assumption — a rate of exactly −100% or below is rejected — and composing several rates is the one place a page can reach that by accident. Every factor in this chain is strictly positive at every corner of every bound the fields allow, so the product is strictly positive and the composed rate is strictly above −100%. The arithmetic is written out in full in the source, and a guard stands behind it so that widening a bound in future produces a message naming the field rather than a silent failure.
Sources, and why there is no rates table
Most calculators on this site cite gov.uk, because they implement statutory rates, bands and thresholds that can be checked against a published source. This one has no statutory figures at all, and it has no market data either. The index return, the yield, the tracking gap and the charges are all yours. This site has no data source for what any index has returned and will not invent one — a figure a calculator makes up is worse than a box it asks you to fill in.
So this page carries no verification stamp and will not borrow one. Its claim is arithmetic only: given these rates and the conventions stated above, the schedule is what they compound to.
What this is not
It is not a forecast. A single path at a constant rate badly understates the spread of real outcomes, and an index return is exactly the kind of figure that arrives as a sequence rather than as an average. It does not model tax, ISA or pension allowances, dealing charges, the currency exposure of a fund tracking an index priced in another currency (the S&P 500 calculator does), or a rebalancing between funds. It names no fund, index provider or platform and recommends none — it is information, not advice.
Nothing you type here is transmitted or stored — there is no application server and no database. A share link is the exception: it carries your figures in the URL. What that means.
Frequently asked questions
- Why did my index fund return less than the index?
Usually because the index figure you are comparing against is the wrong one. An index level excludes the dividends its companies pay, and a fund holds the shares and receives them, so a fund tracks the total return version — a different and higher series. On this calculator's defaults an index returning 7.00% on its level with a 2.00% yield is a total return of 9.14%. After a 0.05% tracking gap and a 0.10% ongoing charge, the pot compounds at 8.98%. All three steps are separate and the page prices each one.
- What is the difference between a price index and a total return index?
A price index tracks the price of its constituents and nothing else. A total return index assumes every dividend is reinvested in the index on the day it is paid. The gap between them is roughly the dividend yield, every year, compounded — so over decades it is very large. Almost every index figure in the press, and almost every chart, is the price version; a tracker fund tracks the total return version. Comparing your statement against the first one is the most common way to conclude, wrongly, that a fund is underperforming.
- Is tracking difference the same as the ongoing charge?
No, and this calculator keeps them apart so they are not counted twice. The published tracking difference is the fund's return less the index's, which already includes the ongoing charge. The tracking gap box on this page is what remains after the ongoing charge has been accounted for: sampling rather than full replication, cash waiting to be invested, the fund's own dealing costs, less securities lending revenue and any advantage in how dividends are taxed at source. It can be negative, meaning the fund beat its index net of its own charge, which is why it is composed into the growth rate rather than treated as a fee — a fee cannot be negative.
- Should I buy accumulation or income units?
Before costs and tax it makes no difference to the return. Accumulation units roll the income into the unit price; income units pay it out and you buy more with it, and reinvested at the same price those are the same holding. What differs is friction — reinvesting by hand may be an order and a dealing charge, and the cash sits out of the market until you do it — and record-keeping outside a wrapper, because reinvested income adds to what your units cost you and a disposal that ignores that is taxed twice on the same money. The income is taxable in the year it arises either way, including on accumulation units where nothing is paid out.
- What return should I assume for an index fund?
There is no correct answer and this calculator will not pretend otherwise. It has no market data, so it cannot tell you what any index has returned, and a figure it invented would be worse than the box it asks you to fill in. The useful approach is to try several assumptions and look at the spread rather than picking one and trusting it — the difference between the answers tells you more than any single answer does. Be careful to feed in the same kind of figure you are comparing against: a level return and a total return are not the same number.
- Why does the platform fee not change the rate?
Because it is not taken out of the return. A fund ongoing charge is levied inside the fund, before the unit price is struck, so it reaches you as a smaller return — it changes the rate. A platform fee is charged on the value your provider is holding and deducted from the pot, so it changes how much money there is rather than how fast it grows. They can be the same percentage and they are not the same charge, which is why the last two rows of the chain share a rate and why the platform fee is the only one visible in the schedule’s fee column.
- Is this a forecast of what my index fund will be worth?
No. It computes what would happen if one rate held exactly, every single period, for the whole term. Index returns arrive as a sequence rather than as an average, and the order they arrive in changes the outcome — two paths with identical average returns can end a long way apart. What is genuinely more stable than the return is the gap between the index and you, which is what this page measures.