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Glossary · Savings

AER (Annual Equivalent Rate)

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Definition: The interest rate on a savings account as if interest were paid and compounded once a year — used to compare accounts on a like-for-like basis.

AER normalises advertised savings rates by assuming all interest is reinvested, regardless of whether the account pays monthly, quarterly or annually. Banks are required by the FCA to quote AER on savings products.

Primary source: legislation.gov.uk/ukpga/2000/8

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