What is Annual Equivalent Rate?

AER stands for 'Annual Equivalent Rate' and represents your actual return each year. It is used as a way to compare savings rates easily as it provides a standardised calculation.

The 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.