Savings Jargon Buster

There are various words and phrases used when it comes to Savings. That’s why we’ve created this handy jargon buster to help explain and define some of the terms most typically used.

A

Account
Where your savings are held with the building society; your account is personal to you.

Account Holder
The person whose name in which the account is held.

AER
Annual Equivalent Rate: this is the interest rate earned if it was paid on a yearly basis and compounded; the higher the AER, the higher the interest you will earn.

Automated Payments
A scheduled and often recurring electronic payment that is made on a predetermined date.

 

B

BACS (Bankers’ Automated Clearing System)
A method of electronic payment made from one account to another.  Mainly used for Direct Debits and takes 3 working days to clear in the designated account.

Base Rate
This is the interest rate charged by the Bank of England when lending money to some building societies and banks. This rate is susceptible to fluctuations and influences the rates that banks and building societies charge people to borrow money or pay them on their savings.

Bonds
A deposit-based savings account which earns a fixed interest rate over a designated term. The term is typically between 1 and 5 years.

Bonus Account
An account which offers a bonus rate of interest on top for the set interest rate for a fixed period of time.

 

C

Cash ISA
A cash-based savings account that does not charge tax on any interest earned throughout the financial year. There is a maximum limit for how much you can deposit into a cash ISA each tax year.

CHAPS
Clearing House Automated Payment System: the process for making an electronic bank-to-bank same day payment.

Child Trust Fund (CTF)
A long term account set up specifically for children. They have been replaced by Junior ISAs.

Compound Interest
Interest earned on both the account’s original sum and any interest already earned by it.

 

D

Deposit
An amount paid into an account.

Direct Debit
A direct, agreed payment made by a third party into a bank account on set dates.

 

E

Easy Access Account
An account that allows you flexibility to deposit and withdraw money when you need to.

 

F

Fixed Rate
A set interest rate that does not change throughout an agreed term.

 

G

Gross
The full sum of interest earned before any tax deductions.

 

H

HMRC
HM Revenue & Customs: a governmental organisation responsible for collecting taxes the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage and the issue of national insurance numbers.

 

I

Interest
An amount of money you earn from a building society or bank by having a savings account with them. It is calculated based on how much you deposit. Interest is available as both fixed and variable rates.

Interest Rate
The percentage figure used to calculate the exact amount of interest you will earn on your savings account.

ISA
Individual Savings Account: an account where no tax is charged on the interest earned. The different ISA types available are: Cash ISAs; Stocks and Shares ISAs; Lifetime ISAs; Junior ISAs and Innovative Finance ISAs.

ISA Allowance
A designated annual amount allowed for deposits into ISAs. The total amount can be shared across several ISAs or deposited into one ISA account.

 

J

Joint Account
An account shared between two or more individuals.

Junior ISA
A long-term savings account set up by a parent or guardian, specifically for their child's future. Only the child can access the money, and only once they turn 18.

 

L

Lifetime ISA
Available for 18 to 39 year olds to open, a Lifetime ISA (LISA) enables you to save up to £4,000 tax-free each year, which is topped up by the Government’s 25% bonus, up to your 50th birthday.

Lump Sum
A single payment made into a savings account, as opposed to a number of deposits.

 

M

Maturity
The date when your fixed term account comes to an end and when you will no longer received the interest rate, as outlined in your product terms and conditions.

 

N

Notice Period
The number of days an account holder with a notice account must give in order to withdraw money from their savings account.

 

P

Personal Savings Allowance (PSA)
A set amount of interest you can receive without paying interest.

Per Annum
Sometimes seen as ‘p.a’, per annum means each year.

 

R

Regular Saver Account
These are a great way to get you into the habit of saving as these accounts let you put a sum of money away, often rewarding those who do with a higher rate of interest than those who don’t.

 

S

Standing Order
An instruction given by an account holder to deposit a set amount of money into a savings account.

Stocks and Shares ISA
This product type allows you to deposit your ISA allowance across a range of stocks and shares investments.

 

T

Tax
A monetary contribution you make to the government. It is monitored and managed by HMRC.

Tax-Free
A savings account that is exempt from tax.  For instance, the interest on an ISA account.

Tax Year
The tax year runs annually from 6th April to 5th April.

Term
The duration of your investment. Once this expires, you will need to agree a new term and new interest rates with your building society or bank should you wish to continue saving with them.

 

V

Variable Rate
Interest rates which may fluctuate throughout the duration of your account.

 

W

Withdrawal
An amount of money taken out of your account.

 

If you have more queries about your savings account or a potential savings account you may open, we have a savings section which can hopefully answer any of your questions. You can also get in touch with us to speak to a member of our team over the phone or book an appointment in your local branch.