Hypothetical investment question

[Wacky Racer]

If you had £42,500 in 2004 and invested it in something, such as stocks and shares (Not high risk), or high interest bank accounts, how much would you expect it to be worth today? (Give or take)

[Nijj]

Bank savings → ~£65k (interest average 2% as after 2008 collapse rates were v. low)
FTSE 100 → ~£120–130k (with dividends reinvested, the annualised return is about 5–6%.)
Global equities → ~£190k (broad global tracker (US, Europe, Asia) delivered around 7–8% )
US equities (S&P 500) → ~£280–300k (S&P 500 has been the star performer: about 9–10% annualised.)

[Wacky Racer]

Thanks very much for the information, I had no idea, I was just curious.

According to the BOE £42,500 in 2004 would be worth roughly £77,000 today.

[greengreenwood7]

If you believe the inflation figures are an accurate representation of everyday living then that'd be about right

[trickywoo]

In 2004 the S&P 500 was about 1,100, today it’s 6,500.

42,500 put in in 2004 would now be 250,000.

You would of course have paid some fees along the way so the actual amount would be a bit lower but not much.

[trickywoo]

You could pick all kinds of individual companies and come up with crazy numbers.

For example rolls Royce was 82 in 2004 and is now over 1000. The 42k would now be over 500k and you’d have had dividends along the way.

In the S&P example you would have also benefited from the pound falling in value against the dollar so the 250,000 would be a lot more in pound terms.

[Shnozz]

trickywoo said:

You could pick all kinds of individual companies and come up with crazy numbers.

For example rolls Royce was 82 in 2004 and is now over 1000. The 42k would now be over 500k and you’d have had dividends along the way.

Needn’t go back too far at all with RR! I bought just under 11k shares at an average of exactly £1 a few years ago! You’d have been papping yourself if you’d bought £42k worth in 2004 to see them more or less the same in 2023!

[trickywoo]

Shnozz said:

if you’d bought £42k worth in 2004 to see them more or less the same in 2023!

Indeed. Presumably you’d have had decent dividends over the years at least.

[JagYouAre]

Shnozz said:

trickywoo said:

You could pick all kinds of individual companies and come up with crazy numbers.

For example rolls Royce was 82 in 2004 and is now over 1000. The 42k would now be over 500k and you’d have had dividends along the way.

Needn’t go back too far at all with RR! I bought just under 11k shares at an average of exactly £1 a few years ago! You’d have been papping yourself if you’d bought £42k worth in 2004 to see them more or less the same in 2023!

Exactly, you'd have had to show some nerve to hold them all the way through, your £42,500 bought at 82p would have been worth about £226k at the end of 2013, just £23k towards the end of 2020, and as you say, £555k now!!

[Wacky Racer]

Thanks again for all the helpful replies, very much appreciated,

I'll tell you why I was asking

An elderly friend of mine in 2004 did one of these "equity release" plans with a well known bank.

Their house was paid for and worth £175,000 at the time.

Being retired and only of modest means they "borrowed" £42,500 against the house.

The deal was they (Him and his wife) were entitled to stay in their home until the surviving partner died, or went into a care home permanently.

They then owned 70% of their home, leaving the remaining 30% to them.

Therefore, the very next week the bank owned 70% of a property worth £175,000. ie: £122.500 for an outlay of £42,500.

Sounds ridiculous, and I told them at the time, but they went ahead, after much thought,

To be fair, the firm said think about this very carefully, and take legal advice if you want to.

Now (2025) his wife died several years ago and unfortunately I don't think he will see a month out because of failing health.

The house is now worth £300,000 (Give or take), so the bank's share (When sold) will be £210,000 for an outlay of £42,500,

This seems a great return (for them), but that's why I wondered, if they had invested the £42.500 in something else would it have grown by a similar amount? (Given that being a bank, they would be very savvy)

Just to add, I have no financial interest in this, so it makes no odds to me.

[NowWatchThisDrive]

trickywoo said:

In the S&P example you would have also benefited from the pound falling in value against the dollar so the 250,000 would be a lot more in pound terms.

Yup - in GBP terms and with divi reinvestment along the way, it'd be about £494k today before fees (12.39% annualised). For comparison, MSCI World would be ~£382k (11.02%) and FTSE 100 ~£304k (7.39%).

[Jon39]

Wacky Racer said:

If you had £42,500 in 2004 and invested it in something, such as stocks and shares (Not high risk), or high interest bank accounts, how much would you expect it to be worth today? (Give or take)

Shares (not high risk).
Base £42,500 from 1 Jan 2004 to market close last Friday.
£318,018.

High interest bank accounts, you have selected an unfortunate period.
For a long time following 2008, savings account interest rates were well below inflation.
I cannot answer your bank account question, but looking into inflation, I see that prices have doubled.

Retail Price Index;
Jan 2004 = 183.1
Jul 2025 = 406.2

( £42,500 ÷ 183.1 x 406.2 = £94,285 )

An average retail item costing £42,500 in 2004, would now cost about £94,000.

Edited by Jon39 on Friday 29th August 09:58

[Jon39]

Wacky Racer said:

An elderly friend of mine in 2004 did one of these "equity release" plans with a well known bank.
Their house was paid for and worth £175,000 at the time.
Being retired and only of modest means they "borrowed" £42,500 against the house.

It sounds as though your friends benefited though by receiving £42,500 cash.
It is a reasonable philosophy to avoid ever having debt (possibly except PCP on a quickly depreciating EV), but not everyone is able to do that.
I suppose borrowing the £42,500 made their final years more comfortable and forfaiting the house value gain was a loss only suffered by their beneficiaries.

Banks and/or 'equity release' lenders probably make good money on some of their transactions, but not so good on others.
Rather like insurance, they work on averages, but should do well on the transaction that you have described, both from the interest received and particularly in this case by the capital value appreciation exceeding inflation.

Perhaps the lesson here for us to hold some bank shares.

Edited by Jon39 on Friday 29th August 12:34

[LooneyTunes]

Wacky Racer said:

The house is now worth £300,000 (Give or take), so the bank's share (When sold) will be £210,000 for an outlay of £42,500,

This seems a great return (for them), but that's why I wondered, if they had invested the £42.500 in something else would it have grown by a similar amount? (Given that being a bank, they would be very savvy)

That's not how banks usually work. They won't just leave money sat around in the same thing without considering other options.

They also don't often tie up liquidity in assets that have:
Variable future value (risk)
Unknown exit/maturity dates

... but that's exactly what a loan of this type represents, which is part of the reason why there would be a significant premium attached.

Of course, there's also the question about whether the premium was indeed reasonable and whether people were sold products that actually met their needs. It's one area where I can imagine there was scope for significant sales commission and vulnerable clients: not a winning combination if you want everyone to act ethically.

[Shnozz]

Wacky Racer said:

Thanks again for all the helpful replies, very much appreciated,

I'll tell you why I was asking

An elderly friend of mine in 2004 did one of these "equity release" plans with a well known bank.

Their house was paid for and worth £175,000 at the time.

Being retired and only of modest means they "borrowed" £42,500 against the house.

The deal was they (Him and his wife) were entitled to stay in their home until the surviving partner died, or went into a care home permanently.

They then owned 70% of their home, leaving the remaining 30% to them.

Therefore, the very next week the bank owned 70% of a property worth £175,000. ie: £122.500 for an outlay of £42,500.

Sounds ridiculous, and I told them at the time, but they went ahead, after much thought,

To be fair, the firm said think about this very carefully, and take legal advice if you want to.

Now (2025) his wife died several years ago and unfortunately I don't think he will see a month out because of failing health.

The house is now worth £300,000 (Give or take), so the bank's share (When sold) will be £210,000 for an outlay of £42,500,

This seems a great return (for them), but that's why I wondered, if they had invested the £42.500 in something else would it have grown by a similar amount? (Given that being a bank, they would be very savvy)

Just to add, I have no financial interest in this, so it makes no odds to me.

No different to the way an actuary will price an annuity though - there will be winners and losers on both sides.

Had they died within a short period of the equity release, the lender would have been quids in. Dying later, less so but the "investment" on the lenders part is hedged against an increase in property prices. In this instance, it sounds like the inhabitants lived a lengthy period after the release and the property only increased by a modest percentage.

Other instances, the inhabitants might have only survived a short period or the house price might have doubled or more in that period as many have in certain parts of the country.

The many pay for the few is a term often used in insurance, but can apply across many investments.