Equivalent Rate Calculator - AER

Your details

The stated or advertised annual interest rate before compounding is applied. Enter it as a percentage, e.g. 5 for 5%.
%
How often interest is compounded under the current rate - monthly means 12 times per year.
The target frequency you want the equivalent nominal rate for. Useful when comparing products with different compounding schedules.
Annual Equivalent Rate (AER)Good yield
5.1162%

The true annual return after all compounding. Use this number to compare any two accounts directly.

Equivalent nominal rate5.0209%
Periodic rate (original)0.4167%
Periodic rate (new frequency)1.2552%
Interest per £1,000 (1 year)51.16
5.1162% %
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AER: 5.1162% - the true annual yield

  • The AER of 5.1162% is the only number that matters when comparing savings accounts - it captures the full effect of compounding in a single figure.
  • Compounding monthly lifts your effective yield above the 5% headline rate by 0.1162 percentage points.
  • A product compounding quarterly at 5.0209% delivers exactly the same return as 5% compounded monthly.
  • On a £1,000 deposit held for one full year, you would earn £51.16 in interest at this AER.

Next stepUse the AER when comparing any two savings products. Ignore the nominal rate - the AER already accounts for how often interest is added to your balance.

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