Best Compound Interest Investments In The UK
Adam Woodhead
Co-Founder
Adam is a passionate investor who created The Investors Centre (TIC) to combine his professional skills with his love for investment. His goal is to offer a platform filled with valuable resources, practical advice, and effective strategies for anyone looking to make their mark in the investment world.
“Investment is about more than just numbers; it’s about strategy, research, and the willingness to adapt. At TIC, we’re here to provide the tools and knowledge you need to succeed on your investment journey.”
Thomas Drury
Co-Founder
Thomas is an experienced financial trader in leverage instruments, crypto and general investing. He has over a decade experience in finance and holds Chartered Status in the financial industry, Thomas’s speciality is trading CFDs, Forex and Day Trading. His crypto portfolio is heavily weighted towards BTC and Eth, but enjoys trading low cap crypto’s with higher volatility. Thomas’s favourite trading strategy is break out Trading.
“Our commitment at The Investors Centre is unwavering. We strive to provide clear, actionable advice that empowers you to achieve financial success. Our vision is a future where anyone can invest confidently and wisely.”
Table of Contents
Disclaimer
How We Test
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eToro
TIC Invest Score: 4.7/5
68% of Retail CFD Accounts Lose Money
IG
TIC Invest Score: 4.5/5
61% of retail CFD accounts lose money.
Quick Answer: Which Investments Give the Best Compound Interest?
Investments like Stocks and Shares ISAs, dividend-paying ETFs, pension funds (SIPPs), and high-yield savings accounts offer strong compound interest potential. The best results come from low fees, regular contributions, and reinvesting earnings over time to maximise growth and take full advantage of compounding.
Investment Provider Comparison Chart
| Investment Provider | eToro | IG | Trading 212 | Interactive Investor | XTB |
|---|---|---|---|---|---|
| Regulator | FCA | FCA | FCA | FCA | FCA |
| Mobile App Usability | 5/5 | 4.5/5 | 4.5/5 | 4/5 | 4.4/5 |
| Variety of Assets | Stocks, cryptocurrencies, CFDs | 18,000+ markets, stocks, ETFs, commodities, currencies, bonds, funds | 12,000+ global stocks & ETFs, commodities, forex | 1,000+ ETFs, Stocks (UK & International), Bonds, Ethical Investments | Stocks, ETFs, CFDs, Forex, Indices, Commodities |
| ISA Available | Yes (in conjunction with Moneyfarm) | Yes | Yes | Yes | No |
| Trustpilot Score | 4.3/5 | 4.0/5 | 4.6/5 | 4.7/5 | 4.4/5 |
| Fee Score | 4/5 | 4/5 | 4/5 | 4.2/5 | 4.3/5 |
| Overall Review Score | 4.7/5 | 4.5/5 | 4.5/5 | 4.4/5 | 4.3/5 |
eToro – Best Investment Provider for Fixed Compound Interest
Pros & Cons
- Commission-free stock investing
- Unique CopyTrader™ social trading feature
- Intuitive interface for new users
- FCA regulated
- $5 withdrawal fee
- Higher spreads on non-stock assets
- Limited depth for advanced traders
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How Much Does It Cost to Invest with eToro?
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Is eToro Safe and FCA Regulated?
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Who Should Use eToro?
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What Features Stand Out on eToro’s Platform?
eToro offers £0 commission on stocks. There’s a $5 withdrawal fee and a $10 monthly inactivity fee after 12 months. Spreads on forex start from 1 pip. Currency conversion fees apply unless using eToro Money.
Yes, eToro is regulated by the FCA (FRN 583263) and protects UK client funds under FSCS. The platform also uses two-factor authentication and industry-standard security protocols.
eToro is perfect for beginners who want a simple platform, low costs, and the ability to follow or copy expert investors. It also appeals to users exploring both stocks and crypto in one place.
eToro’s standout feature is CopyTrader™, which lets users replicate the portfolios of top investors. The app also includes real-time data, social feeds, analyst ratings, and integrated crypto trading—all in an easy-to-navigate design.
CFDs are complex instruments with a high risk of losing money rapidly due to leverage. 61% of retail CFD accounts lose money when trading CFD’s with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
IG – Diverse Instruments, Educational Resources, Competitive Pricing
Pros & Cons
- Access to 18,000+ markets
- Advanced tools like ProRealTime
- ISA and SIPP available
- Strong FCA regulation
- £12/month inactivity fee
- Higher fees for infrequent traders
- May overwhelm beginners
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How Much Does It Cost to Invest with IG?
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Is IG Safe and FCA Regulated?
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Who Should Use IG?
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What Features Stand Out on IG’s Platform?
UK share dealing costs £8 per trade or £3 if you make 3+ trades per month. Platform fees are £96/year unless actively waived. Forex spreads start from 0.6 pips. Additional charges apply for international markets and data feeds.
Yes, IG is fully regulated by the Financial Conduct Authority (FCA). Client funds are held in segregated accounts and protected under the FSCS scheme up to £85,000 in case of broker insolvency.
IG is ideal for experienced investors who want access to global markets, powerful charting tools, and tax-efficient accounts. It suits active traders and long-term investors comfortable with a slightly more advanced platform.
IG offers advanced charting, smart order types, ProRealTime integration, and extensive market research. Users can invest through web or mobile, with access to ISAs, SIPPs, and margin trading. The platform is customisable and supports multiple asset classes.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Trading 212 – Best for Commission-Free Investing with Long-Term Compound Potential
Use code ‘TIC’ to get a free share worth up to £100
Pros & Cons
- £0 commission on stocks and ETFs*
- Intuitive mobile and web platform
- Fractional shares available
- ISA support
- No inactivity or withdrawal fees
- Limited research tools
- No advanced charting or order types
- No access to bonds or mutual funds
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How Much Does It Cost to Invest with Trading 212?
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Is Trading 212 Safe and FCA Regulated?
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Who Should Use Trading 212?
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What Features Stand Out on Trading 212’s Platform?
Trading 212 offers commission-free investing on UK and US stocks and ETFs. There are no platform, withdrawal, or inactivity fees*. Currency conversion fees apply for non-GBP trades.
Yes, Trading 212 is regulated by the FCA and provides FSCS protection up to £85,000. It uses bank-level encryption and segregated accounts for user funds.
Ideal for beginners and cost-conscious investors who want easy access to stocks and ETFs without paying trading fees. It’s also great for those using ISAs.
The app features a clean, user-friendly design, instant order execution, fractional investing, and auto-invest portfolios. It’s tailored for simplicity rather than professional-grade tools.
*Other fees may apply. See terms and fees.
Trading and investing involve risk. The value of your investments can go up or down, and you may lose all or part of your capital. These products may not be suitable for all investors. Please ensure you fully understand the risks involved.
Interactive Investor – Best for Long-Term Investors Focused on ISA and SIPP Compounding
Pros & Cons
- Flat monthly fees benefit larger portfolios
- Wide asset access including funds, stocks, ETFs, trusts
- Strong research and portfolio tools
- ISA, SIPP, and GIA accounts supported
- Less cost-effective for small investors
- No forex or crypto trading
- Fewer short-term trading features
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How Much Does It Cost to Invest with Interactive Investor?
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Is Interactive Investor Safe and FCA Regulated?
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Who Should Use Interactive Investor?
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What Features Stand Out on Interactive Investor’s Platform?
Plans start from £4.99/month. UK share dealing costs £3.99 per trade, and fund trading is free. The flat fee model helps reduce costs for frequent or high-value investors.
Yes, Interactive Investor is FCA-regulated and client money is protected under FSCS up to £85,000. The platform is considered one of the most secure and reputable in the UK.
It’s best suited for long-term UK investors managing larger portfolios or using ISA/SIPP tax wrappers. The flat fee becomes more cost-effective with higher investment volumes.
Strong portfolio planning tools, comprehensive market research, and full ISA/SIPP functionality. It also supports ethical investing and a wide range of UK and international assets.
Trading and investing involve risk. The value of your investments can go up or down, and you may lose all or part of your capital. These products may not be suitable for all investors. Please ensure you fully understand the risks involved.
XTB – Best for Active Traders Seeking Compound Growth Through Low-Cost Investing
Pros & Cons
- £0 commission on stocks and ETFs
- No deposit or withdrawal fees
- Excellent educational content via XTB Academy
- User-friendly xStation 5 platform
- FCA regulated
- No ISA or SIPP support
- No MetaTrader 4 or 5
- Limited asset range compared to some competitors
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How Much Does It Cost to Invest with XTB?
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Is XTB Safe and FCA Regulated?
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Who Should Use XTB?
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What Features Stand Out on XTB’s Platform?
XTB offers commission-free trading on stocks and ETFs up to €100,000/month. No account, deposit, or withdrawal fees. Forex spreads start from 0.1 pips (Pro account). Inactivity fee of €10/month applies after 12 months.
Yes, XTB is FCA regulated and fully compliant with UK standards. Funds are protected under the FSCS up to £85,000. The broker also uses segregated accounts and standard encryption for security.
XTB suits beginners and cost-conscious investors who want a simple, low-cost way to trade major assets. It’s also ideal for those who value education and want to improve trading skills.
The xStation 5 platform is fast, easy to use, and packed with tools like heatmaps, sentiment indicators, and earnings calendars. XTB also offers excellent mobile functionality and comprehensive educational modules.
73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
What do I need to know about Compound Interest?
Once I wrapped my head around how compound interest works, it completely changed the way I approached money. It might seem simple, but its long-term impact is massive.
In short, compound interest means earning interest on both your original investment and the interest you’ve already earned. It’s like a snowball—small at first, but growing faster the longer it rolls.
The key is time. The earlier you start investing—even with small amounts—the more powerful the compounding effect. That’s why I focus so much on long-term strategies.
How Can I Calculate Compound Interest?
Calculating compound interest used to be some mysterious, spreadsheet-wizardry thing. But once I got the hang of the formula, it all clicked.
Here’s the breakdown:
- P = Principal (your starting amount)
- r = Annual interest rate (as a decimal)
- n = Number of times the interest is compounded per year
- t = The number of years you’ll let it grow
The formula looks like this:
A = P(1 + r/n)ⁿᵗ
Where A is the total amount after interest is added over time.
Let’s run a quick example. If you put £1,000 into a conservative investment earning 5% annually. Then leave it alone for 10 years, compounded once a year. Using the formula it would look like this:
A = 1000 (1 + 0.05)^10 ≈ £1,628.89
So just by letting that money sit and grow, it turned into over £1,600. That’s compound interest at work—and it’s why I’m always looking for investments that give me the freedom to let my money grow quietly in the background.
What is the Compound Interest Formula?
When I first started taking investing seriously, someone told me, “Learn the compound interest formula—it’s the secret sauce to real wealth.” At the time, it felt a bit too ‘mathy’ for me, but once I understood how each part of the formula worked, it totally changed how I approached building my portfolio.
A = P(1 + r/n)ⁿᵗ
Once I started playing around with this formula—running different numbers through it—I realised how powerful a few tweaks can be. For example:
- Bigger starting investment? Huge difference over time.
- Higher interest rate? Compounds faster.
- Monthly compounding instead of yearly? Even better.
- Leave it in for longer? That’s when the compound really kicks in.
The Rule of 72: My Favourite Shortcut
Now, I love the formula, but I’ll be honest—sometimes I just want a quick estimate. That’s where the Rule of 72 comes in. I use it to get a rough idea of how long it’ll take for an investment to double.
Here’s how it works:
72 ÷ your annual interest rate = years to double your money
So if I’m looking at an investment earning 6% a year, I do this:
72 ÷ 6 = 12 years
Boom. That’s it. In about 12 years, that money should double—assuming everything stays on track.
It’s a great mental shortcut when comparing different options. I find it useful, especially if I’m weighing risk vs. return or deciding whether to go with something a bit more aggressive.
How Can I Use Spreadsheets to Plan for Compound Growth?
I’m a bit of a spreadsheet nerd—I’ll admit it. But once I realised how easily I could model compound interest in Excel or Google Sheets, it became one of the most valuable tools in my financial toolkit. If you are serious about growing your money over time, learning how to run your own numbers is a game-changer.
Here’s how I set it up:
- Start with the basics: I create a few cells for the main variables—my starting amount (principal), the annual interest rate, how often the interest is compounded (monthly, annually, etc.), and how long I plan to invest.
- Plug in the formula: In Excel or Google Sheets, the formula looks like this:
=P*(1+r/n)^(n*t)
Just replace P, r, n, and t with the relevant cell references. - Test scenarios: This is where it gets fun. I tweak the interest rate, increase the deposit, or extend the timeline to see how the numbers shift. It’s amazing how even small changes can lead to dramatically different outcomes over time.
I’ve found that spreadsheets aren’t just for calculating—they are a useful tool for visualising. Sometimes I’ll add a graph to show how my investment grows year by year. Watching that curve steepen is very satisfying.
Are there other ways to Calculate Compound Interest?
When I want a quick answer without opening a spreadsheet, I reach for an online compound interest calculator. They’re free, easy to use, and perfect for getting fast projections.
I just enter the basics—investment amount, interest rate, compounding frequency, and time—and it shows me the future value. Some even let you factor in monthly contributions, which is great for simulating ongoing growth.
These tools are my go-to for comparing platforms or running quick “what-if” scenarios. They’ve definitely helped me plan smarter and stay motivated by showing how my money could grow over time.
The Different Types of Compound Interest Investment Accounts
When I started investing in the UK, my main goal was simple: let my money grow. Compound interest was the key, and over the years, I’ve used a range of accounts to make the most of it.
Savings Accounts
I started with a basic savings account for my emergency fund. The rates weren’t great, but the compounding helped a little. It’s low-risk and good for short-term savings.
Fixed-Rate Bonds
When I had cash I didn’t need right away, I put it into fixed-rate bonds. They offered better rates than savings accounts, and the locked-in nature made the compounding more predictable.
ISAs (Cash & Stocks and Shares)
ISAs are my top pick. I use Cash ISAs for short-term goals and Stocks and Shares ISAs in the UK for long-term investing. The best part? All the growth is tax-free, which really supercharges compounding.
Pension Funds (SIPPs)
SIPPs are where I play the long game. Between tax relief and decades of compounding, they’ve become one of my most powerful wealth-building tools.
Investment Funds (with Reinvestment)
Investment funds may not offer compound interest directly, but I reinvest the dividends—and over time, that mimics compounding.
Pros and Cons of Compound Interest Investments
Choosing the right investment app depends on your experience level, portfolio size, and trading goals. For beginners, eToro stands out with its intuitive design and social features. XTB is ideal for cost-conscious users, while Interactive Investor suits long-term planners with larger portfolios.
If you’re seeking global access and institutional tools, Interactive Brokers and Saxo deliver advanced features. Active traders will benefit from IG’s robust research and market depth, while Trading 212 offers an accessible, low-cost entry point.
What I Enjoy
- Exponential Growth – Watching small, regular investments snowball over time is incredibly motivating.
- Saves Me From Myself – Compounding works best when I leave my investments alone, which encourages long-term thinking.
- Tax Benefits – ISAs and pensions let your money grow tax-free, which gives compounding an extra edge.
- So Many Options – There’s always a suitable account, whether I want something safe or a bit more adventurous.
What to Watch Out For
- Inflation Risk – Savings accounts might not keep up with inflation.
- Locked-In Periods – Fixed-rate bonds and pensions can limit access when you need it most.
- Interest Rate Changes – If you’re in a variable rate account and rates fall, your growth slows. I try to stay aware of rate trends.
- Market Volatility – Stocks and Shares ISAs can grow fast—but they can also dip. You need to stay calm through the ups and downs.
My Top Picks for Compound Interest Investments in the UK
Over the years, I’ve tried a mix of traditional and more modern compound interest investments, tweaking my approach depending on my goals, time frame, and how involved I want to be. These are the options I keep coming back to:
Fixed Rate Bonds
These are great when I want a guaranteed return without the stress of market volatility. I’ve used fixed-rate bonds during times when I knew I wouldn’t need access to the money for a year or two. I find their predictability valuable—especially for mid-term goals.
Certificates of Deposit (CDs)
While more common in the US, CDs work in a similar way to fixed-rate bonds: you lock in a fixed interest rate over a set term, and in return, you get a guaranteed payout. They’re ideal for conservative investors or money I want to grow steadily without risk. Just keep in mind that there is usually a penalty if you withdraw early.
Money Market Accounts
I’ve used these for holding larger cash reserves that I wanted to grow more than a standard savings account would allow. They usually require a higher balance, but they strike a good balance between accessibility and interest. Money market accounts are great for short-term savings I might need to tap into.
High-Yield Savings Accounts
These are perfect for my short-term goals—like travel or an emergency fund. I’ve loved watching my balance grow slowly but steadily, with zero effort on my part. The best part? My money’s still fully accessible.
Mutual Funds
I got into mutual funds early in my investing journey. They’ve been a reliable way to grow my money over time. I always reinvest dividends, which gives that compounding effect a real boost. They do charge fees though, so I always compare before committing.
Bonds and Bond Funds
I use these to anchor my portfolio when markets feel shaky. Bond funds in my ISA and pension accounts help balance out the riskier stuff. They might not deliver huge returns, but they offer much-needed stability.
ETFs (Exchange-Traded Funds)
ETFs are a staple in my portfolio now. They’re low-cost, diversified, and easy to buy and sell. I especially like them for long-term growth, and when I reinvest the dividends, it gives compounding a nice kick.
REITs (Real Estate Investment Trusts)
I use REITs to get real estate exposure without the hassle of being a landlord. They often pay solid dividends, and by reinvesting those, I get the same compounding benefits I look for in other asset classes. Plus, they’re way more liquid than owning property directly.
What I Always Consider Before Investing for Compound Growth
- Risk Tolerance
I used to panic when the market dropped, but over time I found my comfort zone. Now I ask myself: Can I sleep at night holding this? That simple question helps guide where I put my money.
- Investment Horizon
Short-term goals stay in savings. Long-term goals—10 years or more—go into higher-return investments like ETFs or stocks. Time gives me the confidence to ride out the ups and downs.
- Inflation Impact
Leaving money in low-interest savings means it slowly loses value. That’s why I keep long-term funds in investments that have historically beaten inflation, like equities and property.
- Compound Frequency
Monthly or daily compounding beats annual. It may seem minor, but over time, those extra compounding periods really boost returns.
- Tax Implications
Maxing out my ISA has been one of my smartest moves—no tax on gains, dividends, or interest. I also stay aware of how my other investments are taxed to avoid surprises.
- Fees and Penalties
I once lost more to fees than I realised. Now I always double-check management fees and avoid products with harsh withdrawal penalties—they eat into compounding more than you think.
Can Compound Interest Make You Rich?
I get asked this a lot: “Can compound interest really make you rich?” The short answer? Yes—but it takes time. The real power of compounding isn’t in high returns or risky bets—it’s in patience, consistency, and letting time do the heavy lifting.
It’s a Long-Term Game
When I started investing in my twenties, I didn’t have much to work with. But I knew that the earlier I started, the more I’d benefit from compounding. Looking back now, those small, regular investments made a huge difference. It’s not about timing the market—it’s about time in the market.
My Approach: Consistency Over Flash
I’ve stuck with regular investing, mostly into ISAs, pensions, and dividend-paying ETFs. I reinvest everything—interest, dividends, gains—and focus on growth over the long haul. Sure, there have been market dips, but I’ve stayed the course, and compounding has rewarded me.
Why Diversification Matters
Spreading my money across different asset types—cash, stocks, bonds, REITs—has helped me ride out the bumps. Some investments drop, others rise, but together they keep the compounding going.
It’s Not a Shortcut, But It Works
Compound interest isn’t a get-rich-quick hack—but it’s a smart, proven strategy. With time, discipline, and a solid plan, it’s helped me build real wealth—and it can do the same for you.
What I’ve Learned Along the Way
- Start early. Even small amounts make a huge difference with time.
- Stay consistent. Regular contributions beat perfect timing.
- Expect bumps. Volatility is part of the game—don’t let it shake your strategy.
- Keep learning. The financial world changes, and so should your approach.
- Use the right accounts. ISAs and pensions can supercharge your compounding thanks to tax advantages.
Final Thoughts: Compound Interest Changed How I Think About Money
For me, compound interest isn’t just a finance buzzword—it’s been a foundational part of my entire investing journey. Whether I’m using a high-yield savings account, buying government bonds, or reinvesting dividends from a REIT, I always ask: How does this help my money grow over time?
And that’s the mindset I’d encourage anyone to adopt. It’s not about getting rich quick—it’s about building something meaningful, steadily and securely. If you can match the right investment with your risk tolerance, goals, and time horizon, compound interest becomes a quiet but powerful partner in your wealth-building journey.
Compound Interest won’t turn you into a millionaire overnight, but if you keep at it—invest regularly, reinvest your earnings, and avoid panic-selling during dips—it can absolutely get you to your long-term goals. That could mean a comfortable retirement, buying a home, or simply enjoying financial freedom.
Top 5 Apps
1
eToro
61% of retail CFD accounts lose money when trading CFD’s with this provider.
2
IG
68% of retail investor accounts lose money when trading spread bets and CFDs with this provider.
3
Trading 212
When investing, your capital is at risk
4
Interactive Investor
Trading and investing involve risk. Capital at Risk
5
XTB
73% of Retail CFD Accounts Lose Money
FAQs
What is compound interest, and how does it work?
Compound interest is when you earn interest not only on your original investment but also on the interest it accumulates over time. This creates a snowball effect, allowing your money to grow faster the longer it’s invested.
What types of accounts in the UK offer compound interest?
Common accounts include high-yield savings accounts, fixed-rate bonds, ISAs (especially Stocks and Shares ISAs), SIPPs, and dividend-paying investment funds where earnings can be reinvested for compound growth.
Is compound interest better than simple interest?
Yes—compound interest builds on itself, while simple interest only applies to the initial principal. Over time, compound interest leads to significantly higher returns, especially with regular contributions and reinvestment.
How often should interest be compounded for the best results?
The more frequently, the better. Daily or monthly compounding will generally result in higher returns than annual compounding, assuming all other factors (rate, time, and contributions) remain the same.
Can I lose money with compound interest investments?
Yes—while the concept of compounding helps grow wealth, the underlying investment still carries risk. Stocks, ETFs, and REITs can fluctuate in value, so it’s important to diversify and choose investments aligned with your risk tolerance.
References
- GOV.UK – Individual Savings Accounts (ISAs)
- MoneyHelper – Compound Interest Explained
- Bank of England – How Interest Rates Affect You
- Vanguard UK – Investing for the Long Term
- Hargreaves Lansdown – What is a SIPP?
