Savings Jargon Buster

• AER

  Annual Equivalent Rate (AER) shows the interest rate that would be added to the money you have deposited if interested was paid on an annual basis. A higher AER rates means better returns on the money you have saved. AER is a calculation of the compound interest and any introductory rates to give consumers a more accurate figure they can use to compare different savings accounts.

• Base Rate

  Base Rate refers to the interest rate set by the Bank of England. The interest rates on offer via savings accounts are directly affected by the Bank of England Base Rate of interest. The higher the Base Rate, the better the returns available to savers.

• Bond

  A bond is a savings product that will earn the saver a fixed rate of interest over an agreed period of time. Bond terms tend to be between 1 and 5 years adn are suitable to people whp have an amount of money saved that they will not need to access for the duration of the bond term. Fixed bonds tend to offer a higher interest rate than easy access savings products.

• Easy Access

  Easy Access savings accounts allow you to withdraw your money at anytime without restrictions or penalties. Easy access accounts tend to offer a variable rate of interest instead of a fixed rate.

• ISA

  The Individual Savings Account (ISA) is a savings product introduced in the UK to encourage people to save towards their retirements. The main benefit of an ISA is that you don’t pay any tax on the interest earned. Cash ISA’s are available to any UK resident over the age of 16.

• Help To Buy ISA

  Help To Buy ISA’s are designed to help first-time buyers save for buying a home. You can save up to £1200 in the first month and £200 a month after. When you withdraw your funds to buy your first home a 25% bonus will be added by the government (up to £3,000 max). You cannot hold a Help To Buy ISA and a Cash ISA in the same tax year although some lenders will allow you to split your allowance between the 2.

• Lifetime ISA

  Lifetime ISA’s are targeted at people between the ages of 18 and 50 and offer a 25% bonus on annual savings of up to £100. The bonus is paid on top of any interest earned. The maximum bonus available is currently £32,000 which required people to deposit £100 annually into the ISA between the ages of 18 and 50.

• Investment ISAs

  An ISA can be used for investing in stocks and shares via an online broker or fund management company. These companies charge various fees for managing your portfolio and the value of your investments can go up and down. The benefits of investing via an ISA is that you do not pay tax on dividends, profits or bonds.

• Junior ISA

  Junior Individual Savings Accounts (ISAs) are savings accounts for children and are tax free and long term. To be eligible for a Junior ISA your child should be a UK resident and under the age of 18. Junior ISA’s can be Cash ISA’s or Investment ISA’s and each child can hold both types.