Index Linked Gilts (Dirty prices)

pensionslaw

I think my return from late June to maturity, i.e. 9 months, is going to be approx 1.8% RPI uplift plus 2% initial discount plus 0.1% interest so about 3.9%. Actually bought more as a safe harbour for some UK company cash, and pretty happy with how that worked out. The RPI uplift element is free of CT. Overall this was the equivalent of getting roughly 6% pa taxable interest on company money, which would be hard to achieve I think ?

jake_jones99

pensionslaw said:

I think my return from late June to maturity, i.e. 9 months, is going to be approx 1.8% RPI uplift plus 2% initial discount plus 0.1% interest so about 3.9%. Actually bought more as a safe harbour for some UK company cash, and pretty happy with how that worked out. The RPI uplift element is free of CT. Overall this was the equivalent of getting roughly 6% pa taxable interest on company money, which would be hard to achieve I think ?

For me it turns out just about better than bank interest rates (-tax). Around 5.5% taxable yearly equivalent. You may have also bought at a slightly more advantageous time (I did early May, with a discount of ~0.4%, but also at a lower uplift value). So it is slightly better, but much less exciting than it seemed when I bought it. The RPI fell at one of the fastest rates on record historically, which didn't help.

jake_jones99

Just to wrap up the post, as the gilt matured today. My return was 5.7% annualised, pre tax. Post tax, I made roughly 0.5% more than I would have keeping them in a bank account. So indeed it beat the interest rates, but by much less than what I would have expected.