49 a. is the Gross Interest Rate payable before the deduction of income tax at the rate
50 specified by law (the "specified rate"); an explanatory phrase conveying this meaning
51 must be used in conjunction with this expression.
53 b. is the tax free Rate of interest payable where interest is exempt from income tax. An
54 explanatory phrase conveying this meaning must be used in conjunction with this
57 c. is a notional rate which illustrates the Gross Interest Rate (excluding any conditional
58 bonus payable) as if paid and compounded on an annual basis. An explanatory
59 phrase conveying this meaning must be used in conjunction with this expression. Any
60 assumptions made in calculating the rate should be stated. e.g. if interest is not paid
61 into the account and compounded then the AER will not be achieved.
63In the case of a table or list of rates, the words "gross", "tax free" and "AER" as appropriate
64need not appear after each rate. However, it must be clear which term applies to which rate,
65for example, by the use of column headings or footnotes.
67The above paragraph puts beyond doubt the fact that any advertisement listing a series of
68rates, for example, when comparing competitors' products, need only ensure that the
69appropriate term is clear. This applies the provisions of general notifications of rates (see
70Section 7) to advertisements.
72The AER should be quoted, in respect of the Gross Interest Rate only, in every
73advertisement where an interest rate is quoted.
75This means that all advertisements include one rate which is capable of comparison across
76all advertisements, regardless of product provider and how interest is calculated and paid.
77The AER is a truly reflective rate, taking into account the frequency with which the product
78has interest paid or compounded. So, for example, if two products pay the same Gross
79Interest Rate of interest but one pays or compounds interest more frequently than the other,
80the account which pays or compounds interest more frequently will have a higher AER.
82It is suggested that wording along the following lines should be used (for example, in leaflets,
83supporting wording of advertisements etc.) to explain the AER:
85"AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if
86interest was paid and compounded once each year. [As every advertisement for a savings
87product which quotes an interest rate will contain an AER, you will be able to compare more
88easily what return you can expect from your savings over time.]"
90(The first sentence could be used alone to cut down length).
92The explanation of the AER, “gross”, or ”tax free” need not be included in television; radio;
93telephone; SMS; mobile application; social media; paid search or banner advertisements.
95Advertisements which do not quote a specific rate of interest, for example, which simply
96state that the rate will be x% below base rate, do not need to quote an AER.