Savings and investments jargon buster

Annual Equivalent Rate (AER)
The AER illustrates what the rate would be if interest were paid once a year.  This figure appears in advertisements to enable customers to make a comparison between products.

Base Rate
The Bank of England Base Rate, set by its Monetary Policy Committee every month, determines lending rates in the UK.

Capital
Your assets or funds: your original investment

Capitalised interest
This is the interest earned on your original investment or capital

Certificate of deduction of tax
This is a certificate which details gross interest, tax deductions and net interest and is prepared by banks for their customers with interest bearing accounts.
 
CHAPS
This is a Clearance House Automated Payment System, which is a telegraphic transfer system enabling you to make deposits etc into investment accounts.  

Compound interest
Your capital will earn interest – which in itself will earn interest, which is known as compound interest.

Form R85
This is an Inland Revenue form completed by non tax-payers so that their interest is paid gross.

Gross interest
This is the interest paid before tax is deducted

Instant access account (or demand deposit)
The holder can take money out at any time without penalty.   

ISA
This is an Individual Savings Account and was introduced in 1999 as a tax efficient method of saving, replacing TESSAs and PEPs. From 6 April 2008 the overall subscription limits are £7,200 of which  up to £3,600 may be placed in a Cash ISA. There is no longer a distinction between a Mini and a Maxi ISA.

Maturity
This is when an account reaches full-term.
 
Mini ISA
This is an ISA (individual savings account) in which you can place up to £3,000 in the cash element and £4,000 in the stocks and shares element.  Currently, you can open one cash and one stocks and shares mini ISA within a single tax year. 

Net interest
This is the amount of interest earned once tax has been deducted.

Notice account
This is an account requiring notice before you can access your funds without penalty.  Often the period required is 30, 60 or 90 days.

Year end
This is the end of the accounting year, which is normally when interest is paid.