In relation to deposits, the term AER means the:

• A. The gross deposit return, expressed as the equivalent annual rate of interest payable at the end of the year.
• B. The annual rate of return provided by the deposit, for a typical average deposit size, after deposit interest retention tax (DIRT).
• C. The impact of deposit charges and fees, expressed as an annual reduction in yield over the deposit term.
• D. The average gross return offered by a selection of deposit takers, for a given deposit amount.

Answer: (A)

AER represents the annual equivalent rate of return on a deposit, stated as the gross rate and expressed as if interest were compounded annually. It shows the amount of interest you would effectively earn over a year, assuming the benefit of compounding is realized, and it is provided before tax. This makes it a consistent, comparable measure across deposits with different interest frequencies and compounding periods. That’s why the description of the gross return as the equivalent annual rate payable at the end of the year is the best fit. It isn’t after tax (which would involve DIRT in some contexts), and it doesn’t account for deposit charges or represent an average across providers.