What is the difference between AER and Gross Rate p.a.?

Attentive investors, when handling notice deposits through iFAST Global Bank, find two different interest rates, AER and the annual gross interest rate. There is a numerical difference between these two rates. What exactly is the difference? 

What is AER?  

AER stands for "Annual Equivalent Rate," which is also known as the "effective annual rate" or "annual percentage yield" (Annual Percentage Yield, abbreviated as APY). AER is a method of measuring the interest rate of a savings account or investment product over a year based on compound interest. AER takes into account the multiple interest payments that may occur throughout the year, providing an indicator of the actual return on investment. AER helps investors understand the actual return they can expect from an investment when interest is compounded. If an account has more frequent interest payments, even with a lower nominal interest rate, its AER may be higher than those accounts with less frequent payments. 

What is Gross Rate p.a.? 

 In financial products, "gross rate" usually refers to the interest rate or return rate before deducting any fees, commissions, taxes, or other potential costs. Here are some specific applications: For example, if the annual gross interest rate of a bond or fixed deposit is 5%, it means that without considering any taxes or fees, investors can receive an annual return equivalent to 5% of the principal. 

Understanding the gross interest rate is very important for investors because it helps them assess the potential returns they may get without considering other potential costs. 

What are the differences between the two?  

AER represents the annual equivalent rate, showing investors what the rate would be if interest is paid once a year and compounded; Gross Rate p.a. is the interest payable without considering any taxes. In simple terms, AER is compound interest income, and the annual gross interest rate is simple interest income. 

Now that you understand clearly, you can confidently handle notice deposits through iFAST Global Bank, locking in the current interest rate to increase the value of your assets. 

As a part of the iFAST Group's financial technology ecosystem, iFAST Global Bank provides a range of services including deposits in seven currencies (USD, GBP, HKD, EUR, CNY, SGD,JPY) currency exchange, and cross-border remittances. 

iFAST Global Bank is authorized by the Prudential Regulation Authority of the UK and is fully regulated by both the Prudential Regulation Authority and the Financial Conduct Authority. 

iFAST Global Bank is also a member of the Financial Services Compensation Scheme (FSCS). Your eligible deposits are protected by the Financial Services Compensation Scheme (FSCS) up to a value of £85,000 per person. 

iFAST Global Bank is currently a member of the UK's Faster Payment Scheme and the Clearing House Automated Payment System (CHAPS), and is also a member of the Society for Worldwide Interbank Financial Telecommunication (SWIFT).