AER, Gross or Net?

redjohnboy

I am putting £5000 into a 3 year bond, the interest is stated at;-
4.1% Gross, 3.28% Net, and 4.1% AER
if I want to work out what my final sum will be with my interest, can any one tell me which figure I use to calculate it? is it 3.28% or 4.1%

Lokolo

Could you link us to the account please? It might be an ISA?

It would be 4.1% each year, using the AER (Annual Equivalent Rate)

redjohnboy

The account is with the Cheshire building society, it is a 3 year, fixed rate bond. it is not an ISA
details are on the Cheshire building society webpage

Loughton_Monkey

redjohnboy wrote: »

I am putting £5000 into a 3 year bond, the interest is stated at;-
4.1% Gross, 3.28% Net, and 4.1% AER
if I want to work out what my final sum will be with my interest, can any one tell me which figure I use to calculate it? is it 3.28% or 4.1%

£5,000 will roll up at 4.1% a year cumulatively. That is exactly £640.56.

Then they will deduct tax at 20%, unless you are a non taxpayer and tell them not to.

If it is one that pays Interest annually, then they will pay 4.1% gross a year (less 20%).

YorkshireBoy

redjohnboy wrote: »

details are on the Cheshire building society webpage

...along with a calculator (and explanation) that will answer your question!

http://www.thecheshire.co.uk/investment-saving-account/savings-calculator.htm

Entering...

£5,000
£0
4.1%
3y 0m

...returns a closing balance of £5,640.56 (backing up the post above).