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Savings Jargon Buster

If you're looking to save or invest your money, here are a few words and phrases to make the process simpler:

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.


Your capital is the overall amount of money invested.

Fixed Rate Bond (FRB)

A lump sum of money invested 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 the 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 regarding how much you can save each year. Visit our ISA Subscription Limit page for the current limit.


This is what banks and building societies pay 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.


Penalties can be incurred if you break the conditions of the account, such as not giving sufficient notice for withdrawals.

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 that 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 see whether you could get a higher interest rate.