What is Annual Equivalent Rate?

AER stands for 'Annual Equivalent Rate' and represents your actual return each year.

Savings accounts can work slightly differently between providers e.g. interest could be paid monthly, half yearly or yearly (annually),  and is the reason why AER exists as it provides a standardised way to compare them easily. AER rate will display the the benefit of compound interest, which is where interest also earns interest, so for a 6 month Fixed Term product it assumes interest is paid after 6 months and then interest is earned on top of this. AER takes this into account and is the reason why it's higher than the gross rate.