The annual equivalent rate (AER) is a term used to describe the interest rate that is applied to savings products on an annual basis, taking into account the effects of compounding.

It allows you to compare different savings account options and understand the true return you can expect over a year. What does interest rate mean?

Annual Equivalent Rate (AER) example:

Let’s say you have £1,000 in a savings account with an AER of 3.00%. After one year, your balance would increase to £1,030, assuming no additional deposits or withdrawals have been made.