What is AER and how does it relate to APY?

AER (Annual Equivalent Rate) is the UK term for APY. It shows the actual return on savings or cost of borrowing when compounding is factored in, making it easier to compare financial products.

Why does compounding frequency matter?

More frequent compounding (daily vs monthly vs annually) produces a higher effective yield from the same APR. The difference becomes more noticeable at higher interest rates and over longer periods.

Which rate should I compare when choosing a savings account?

In the UK, always compare AER (equivalent to APY) rather than the nominal rate. AER accounts for compounding differences, giving you a true like-for-like comparison between savings products.

APR to APY Calculator UK | CalculatorZone

Useful next calculations

Use the Compound Interest CalculatorContinue with the related investments & savings question this result raises.
Use the Savings CalculatorContinue with the related investments question this result raises.

When to use this calculator

When you need the mathematical result of a simple or converting interest formula.
When you want to compare simple interest with a compound-interest scenario on another page.
When you are checking interest on a principal, rate and term you already know.
When you need a formula check rather than a product illustration.

A worked example

These are the example figures the calculator opens with.

A worked example
Input	Value
APR (%)	12%
Compounding Periods Per Year	12

For those figures the calculator returns:

APY: 12.68%
APR: 12.00%
Difference: 0.68%
Compounding Periods: 12

Method & assumptions

This calculator converts an Annual Percentage Rate (APR) to an Annual Percentage Yield (APY) using the standard compounding formula: APY = (1 + APR/n)^n − 1, where n is the number of compounding periods per year. Common compounding frequencies are daily (365), monthly (12), quarterly (4), and annually (1). When n equals 1, APR and APY are identical. The calculator can also work in reverse, deriving the equivalent APR from a known APY. In the UK, the regulatory equivalent of APY for savings products is the AER (Annual Equivalent Rate), governed by the Financial Conduct Authority. For mortgage and credit products, the relevant disclosure figure is the APRC, which incorporates fees alongside the interest rate. This tool performs the mathematical conversion only and does not incorporate fees or other charges.

Common mistakes

Using this formula as if it were a UK mortgage or personal-loan illustration.
Mixing simple and compound interest when comparing two products.
Entering time in months while the formula expects years, or the reverse.
Assuming the result includes tax or fees.

What to do next

If the balance compounds, run the same figures in the compound-interest calculator.
If you are comparing a loan product, use the personal loan calculator instead.
Check the term unit (years vs months) before relying on the result.
Keep the formula assumptions in view — this is not a regulated illustration.

Questions people ask

APR (Annual Percentage Rate) is the simple annual interest rate without compounding. APY (Annual Percentage Yield), known as AER in the UK, includes the effect of compounding and is always equal to or higher than APR.