Glossary

AER

Annual Equivalent Rate - this illustrates what the interest rate would be if interest was paid and compounded once each year. This allows individuals to compare more easily what return they can expect from their savings over time. As every advertisement for a savings product which quotes an interest rate will contain an AER, you will be able to compare more easily what return you can expect from your savings over time.

Annual interest

Interest is paid on an annual basis.

Bank of England Bank Rate

Also known as the base rate, this is the interest rate published by the Bank of England in connection with its open money market operations.

Cash ISA

Individual Savings Account - accounts designed to enable an individual to save without paying income tax on their savings. For more details take a look at our guide to ISAs.

Compound interest

This is where interest is added to your total savings balance and your next interest payment is based on the now larger amount. So not only does your saving balance go up, it goes up increasingly quickly.

Fixed rate

A rate of interest that is fixed for a period of time.

Fixed term

A period of time that money is saved for which is agreed on opening the account.

Gross

The contractual rate of interest payable before the deduction of income tax at the rate specified by law (currently 20%).

Interest rate

This is the percentage return that you will receive on your savings. There are gross, net & tax-free interest rates, depending on the account that you have.

Monthly interest

Interest is paid on a monthly basis.

Net

The rate of interest payable after allowing for the deduction of income tax at the rate specified by law (currently 20%).

p.a.

Per annum means every year.

Regular savings

Saving regularly (e.g. every month) into an account.

Tax-free

The contractual rate of interest payable where interest is exempt from income tax.

Tax-free allowance

The amount allowed to be invested in a cash ISA account which is free of income tax.

Variable rate

A rate of interest that may change over time.

Withdrawal

When instructions are carried out to pay money out of your account (e.g. cash taken out of an account).

View all our savings accounts to help you choose the right one.

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