Compound interest can be calculated with the following formula:
FV = PV (1 + i)^N
FV = Future Value (the amount you will have in the future)
PV = Present Value (the amount you have today)
i = Interest (your rate of return or interest rate earned)
N = Number of Years (the length of time you invest)
Assume you have £1000 and you want to invest it for 10 years. You found an investment with 10% return, so after this period what will you have? £1000*((1+ 10%)^10) almost £2,600
If the interest was 0.05%, then after 10 years you would have almost £1,630.
So, in the former example you would have £1600 interest whereas in the later only £630 which is slightly above third of the former although the later interest rate was only half of the former.
Now, imagine you'd save £1000 every year for 10 years and each year the interest rate would be 10%.
How much will you have at the end of the 10 years?