Best way to buy and own gilts as a retail investor

cwep2

I have done this myself also.
I have used iWeb and Fineco.

Now there are only 5 normal Gilts maturing before end 2024 and one linker (which is priced £370 ish, all the rest are high £90s) so maturity options are limited.

Dealing costs of £5-10 are less of a cost than bid/ask spread. Always best to deal on phone in general, electronic bid/ask is often wide because of lack of volume traded, but there are market makers who will make a price better than the typical 1% bid/ask you can see on LSE. My experience on iWeb was 0.15-0.25% away from mid/last price you can see on LSE. These costs do add up and of course double if you sell before maturity. That means on £10k assuming 1yr tenor held to maturity with 4% mid yield, £10 fee and 0.25% from mid, your effective yield is cut to approx 3.65%. 

Clearly for most use cases zero/lower rate tax payers will get better return in a fixed or even notice savings account once dealing costs are taken into account, and it's a lot simpler. Only advantage is being able to sell the Gilt and access money, but doubling dealing costs you may as well stick to instant access at 3.2%+ remembering market expects BoE hikes in next 12 months so instant access rates may go up from here during that time.

Fineco is interesting counterpoint to the main brokers mentioned here. It's Italian by descent but they have a full FSCS protected/FCA regulated UK subsidiary, operated online/app mostly and quite slick interface. Dealing cost £6.95, but various sign up offers will give you 100+ free trades (DM me for sign up link which gives you this - dunno if this is allowed, MODs will remove this part of comment if appropriate). Now it has a more limited selection of UK bonds, in particular it only has the 2.25% and 2.75% coupon bonds until end 2024 so the low coupon treasury notes are not available. But you can see the market price on the exchange and it's much better - as I write this 2023 2.25% is 99.06/99.26 and the 2024 2.75% is 98.13/98.26 and you can deal £50k+ on those prices.

It also has even better prices for European bonds and US bonds so if you want to have Usd or Eur and get 5%+ or 3%+ yields respectively for ~4-6 months maturities then these are available.

So if you only want the sub 1% coupon short dated bonds, iWeb, II and HL can help and I only have experience with iWeb which was fine, but hard to compare without 2-3 people all calling up different places for same bond at same time and comparing prices/notes! If you are less picky about which bonds and want to create a ladder, Fineco probably wins on bid-ask spread/dealing costs. If you want to diversify into Eur or Usd sovereign bonds, Fineco is excellent.

GeoffTF

Do not forget that capital gains on gilts are tax free. Most of the return on the 0.125% issues will be tax free as a result.

preece

If you buy a gilt through let's say Halifax Share Dealing, do they send you the gilt certificate to you via the post ?

Or do they hold onto the certificate for you ( with perhaps a holding fee ? )

Will you be the registered owner of the gilt or is it actually owned by Halifax Share Dealing.

wmb194

preece said:

If you buy a gilt through let's say Halifax Share Dealing, do they send you the gilt certificate to you via the post ?

Or do they hold onto the certificate for you ( with perhaps a holding fee ? )

Will you be the registered owner of the gilt or is it actually owned by Halifax Share Dealing.

There is no certificate, it's electronic. In your example, Halifax acts as your nominee and is the named owner - technically it'll be its nominee company - on the register but you remain the ultimate beneficiary. Whether there's an account fee depends on the broker. If you use Halifax's iWeb there isn't but there is usually a £100 account opening fee (there is or was an offer on to waive this).

preece

wmb194 said:

preece said:

If you buy a gilt through let's say Halifax Share Dealing, do they send you the gilt certificate to you via the post ?

Or do they hold onto the certificate for you ( with perhaps a holding fee ? )

Will you be the registered owner of the gilt or is it actually owned by Halifax Share Dealing.

There is no certificate, it's electronic. In your example, Halifax acts as your nominee and is the named owner - technically it'll be its nominee company - on the register but you remain the ultimate beneficiary. Whether there's an account fee depends on the broker. If you use Halifax's iWeb there isn't but there is usually a £100 account opening fee (there is or was an offer on to waive this).

Would that give you less protection? Should the nominee company get into trouble would that mean relying on FSCS. 

I was about to buy direct from computershare so that I think I would be the nominee and have a certificate, but their charges ( £35 plus 0.375% of the amount in excess of £5,000 ) seem quite high, and the transaction would be via the post rather that over the phone. 

GeoffTF

preece said:

wmb194 said:

preece said:

If you buy a gilt through let's say Halifax Share Dealing, do they send you the gilt certificate to you via the post ?

Or do they hold onto the certificate for you ( with perhaps a holding fee ? )

Will you be the registered owner of the gilt or is it actually owned by Halifax Share Dealing.

There is no certificate, it's electronic. In your example, Halifax acts as your nominee and is the named owner - technically it'll be its nominee company - on the register but you remain the ultimate beneficiary. Whether there's an account fee depends on the broker. If you use Halifax's iWeb there isn't but there is usually a £100 account opening fee (there is or was an offer on to waive this).

Would that give you less protection? Should the nominee company get into trouble would that mean relying on FSCS. 

I was about to buy direct from computershare so that I think I would be the nominee and have a certificate, but their charges ( £35 plus 0.375% of the amount in excess of £5,000 ) seem quite high, and the transaction would be via the post rather that over the phone. 

No, using a nominee account should be as safe as being a certificated holder. There are scare mongers everywhere though. There is no nominee if a certificate is issued, you will be on the register. Nonetheless, the certificate could go missing, and you have to trust the registrar. Nothing is completely safe. You could get run over by a bus tomorrow.

wmb194

preece said:

wmb194 said:

preece said:

If you buy a gilt through let's say Halifax Share Dealing, do they send you the gilt certificate to you via the post ?

Or do they hold onto the certificate for you ( with perhaps a holding fee ? )

Will you be the registered owner of the gilt or is it actually owned by Halifax Share Dealing.

There is no certificate, it's electronic. In your example, Halifax acts as your nominee and is the named owner - technically it'll be its nominee company - on the register but you remain the ultimate beneficiary. Whether there's an account fee depends on the broker. If you use Halifax's iWeb there isn't but there is usually a £100 account opening fee (there is or was an offer on to waive this).

Would that give you less protection? Should the nominee company get into trouble would that mean relying on FSCS. 

I was about to buy direct from computershare so that I think I would be the nominee and have a certificate, but their charges ( £35 plus 0.375% of the amount in excess of £5,000 ) seem quite high, and the transaction would be via the post rather that over the phone. 

Computershare is a rip-off for everything it offers and personally I'd avoid it. If you really want a certificate you could look into buying via a cheaper broker electronically and then having the security 'materialised' i.e. the certificate issued to you and you'd no longer have a holding with the broker. IIRC not all brokers offer this and there will be a fee.

Customer assets are meant to be segregated from the broker so if it e.g., went bust your assets held by the nominee wouldn't be used to pay its debts. What should happen then is that those assets will be transferred to another broker and you'd continue as normal. The FSCS coverage comes in for broker administration fees and fraud or maladministration where for some reason there is a shortfall in assets. Given that Halifax/iWeb is a profitable subsidiary of Lloyds Banking Group I wouldn't worry much about this broker.

If you have a certificate there is no nominee, you are the owner listed on the register.

There are pros and cons to certificate vs nominee. The nominee route is generally cheaper* and everything happens faster, you don't need to worry about losing your certificates and brokers will notify you of e.g., corporate events you need to engage in. The pro to certificates is that you don't need to worry about your broker! If it goes bust the time for your assets to be transferred to another could be six months plus and in the meantime you'll lose the ability to buy, sell and receive distributions.

*You have to watch out for account fees, though. This is why lots of people like iWeb.

preece

Thanks that's really helpful. 

One thing I find perplexing is that if I look at the linker GB00BYZW3J87 on tradeweb for two years ago ( 02/08/2021 ) the yield was -2.694077,

Were people really buying linkers with that loss?

I was wondering if it's because linkers use RPI rather than CPI, and the negative yield compared to RPI isn't so bad.