Glossary of terms
AER stands for Annual Equivalent Rate. Whenever you see an advert for a savings account which shows an interest rate, you will see the AER. This means you can use the AER to compare accounts. It shows what the interest rate would be if your interest was paid and compounded once each year.
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.
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.
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.
A rate of interest that is fixed for a period of time.
A period of time that money is saved for which is agreed on opening the account.
Gross rate means that no tax will be automatically deducted from interest on your behalf. Depending on your personal circumstances, you may need to pay tax on the interest you earn and it will be your responsibility to pay any tax you may owe to HM Revenue and Customs (HMRC).
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.
Interest is paid on a monthly basis.
Per annum means every year.
Saving regularly (e.g. every month) into an account.
Tax free means you will not pay income tax on your interest.
The amount allowed to be invested in a cash ISA account which is free of income tax.
A rate of interest that may change over time.
When instructions are carried out to pay money out of your account (e.g. cash taken out of an account).