Jargon Buster (Savings)
If you're looking to save or invest your money, here are a few words and phrases which will make it easier.
AER: Annual equivalent rate
This is the annual rate of interest, taking into account how often the interest is added to your account. The higher the AER, the better the return on your savings.
Capital
Your capital is the overall amount of money invested.
Fixed-Rate Bond
An investment of a lump sum of money for a specific length of time at a set interest rate.
Gross rate and net rate
The gross interest rate is the interest rate you'll get before any income tax is deducted at the appropriate rate. The net rate is the rate which would be payable after allowing for deduction of income tax at the specified rate from the gross rate.
Individual Savings Account (ISA)
This is a tax-free way of saving or investing money. There are annual limits of how much you can save each year. In the case of the Cash ISA the maximum annual amount is £3600.
Interest
This is what banks and building societies pay to you if you keep your money with them. Interest rates can go up and down, or they can be fixed, and the amount of interest paid can be calculated daily, monthly or annually.
Penalty
Penalties can be incurred if you break the conditions of the account, such as not giving sufficient notice on withdrawals.
With notice/Easy access
Notice accounts specify a number of days notice you must give before you can withdraw money, whereas you can withdraw funds immediately from an easy access account.
Tiered interest rates
The interest rate calculated depends on how much you have in the account.
Variable rate
Most savings accounts pay variable interest, which means the rate of interest changes from time to time. The amount of money you receive will change from time to time so it's important to check round other building societies to check whether you could get a higher interest rate.
