1. What Is AER Savings Interest?

AER (Annual Equivalent Rate) is the official rate for savings accounts in the UK that shows what the interest rate would be if interest was paid and compounded once each year. It allows for easy comparison between different savings products.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (£)
• \( AER \) — Annual Equivalent Rate (%)
• \( t \) — Time period (years)

Explanation: This formula calculates the simple interest earned on savings over a specified period using the AER rate.

3. Importance of AER Calculation

Details: Understanding AER helps savers compare different savings accounts accurately and make informed decisions about where to place their money for optimal returns.

4. Using the Calculator

Tips: Enter the principal amount in pounds, AER percentage rate, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between AER and APR?
A: AER is used for savings accounts to show the interest you'll earn, while APR is used for loans and credit to show the interest you'll pay.

Q2: Does AER include compound interest?
A: Yes, AER takes into account compound interest if it is paid more than once per year, making it a true reflection of the annual return.

Q3: Is AER the same as gross interest?
A: AER is similar to gross interest but accounts for compounding frequency, making it a more accurate comparison tool between different savings products.

Q4: How often is AER paid?
A: This depends on the specific savings account - it could be monthly, quarterly, or annually. AER standardizes these different payment frequencies for comparison.

Q5: Are there any fees that affect AER?
A: AER typically doesn't account for account fees or charges. Always check the full terms and conditions of any savings account.