Pension (SIPP), ISAs and Retirement

masonic

the_medium_bear said:

Regarding that really usefull giltladder link.

So basically this shows what i could gain for each year for a given gilt, is that price guaranteed (i.e. the at a minimum getting my money back + the yearly interest + yearly inflation) if i held each one to maturity. I guess what i dont understand is the dirty price (which i understand includes accrued interest + inflation)  but how to i project any potential gain in the gilt price (could i get less if the price of the gilt falls or can i just assume if held to maturity it would at least get my principle back. and the plan here to to have multiple guilts maturing each year with a known value (and i assume this is based on holding to maturity

I think ultimately i dont know how to understand the projected return at any given point (i.e. https://www.londonstockexchange.com/stock/T30I/united-kingdom/company-page ) how do i know what the current price is in relation to what i may see as a return in 2030 (given its current price ) I think the percentage increase is aprox 27% but from a high of aprox 50% in 2021 since inception but how do i work out what portions is interest, what is inflation etc and what portion is bond price change (and therefor projection)

if i has sold before maturity i would have got more if i sold in 2021 i presume, its forward estimation i cant understand (i know inflation is an unknown here)

apols for asking probably basic questions, but perhaps i just cant get my head around this

You can just use the real yield column at https://www.dividenddata.co.uk/index-linked-gilts-prices-yields.py to get an overall picture.

This will include the coupon and any capital gain/loss to return to par at maturity without inflation linking, so you can figure out how much of the overall yield is interest vs capital gain using the coupon divided by clean price (e.g. TR31 has a running yield of 0.125/95.28 = 0.13%, so another ~0.84% comes from capital gain, and the rest from inflation - or you can take the maturity price divided by current clean price and annualise, e.g. (100/95.28)^(1/5.76) = 0.84%).

Since you only know the price now and at maturity, you cannot predict what overall return you might get over periods in between.

T30I, which I don't think is available to buy in most places, is an old-style ILG that trades on dirty price. It's real yield is 4.125/342.5 = 1.2% and one would need to look it up at the DMO to find out its current index ratio to find out its clean price and hence the capital gain or loss you'd get holding to maturity.

the_medium_bear

masonic said:

the_medium_bear said:

Regarding that really usefull giltladder link.

So basically this shows what i could gain for each year for a given gilt, is that price guaranteed (i.e. the at a minimum getting my money back + the yearly interest + yearly inflation) if i held each one to maturity. I guess what i dont understand is the dirty price (which i understand includes accrued interest + inflation)  but how to i project any potential gain in the gilt price (could i get less if the price of the gilt falls or can i just assume if held to maturity it would at least get my principle back. and the plan here to to have multiple guilts maturing each year with a known value (and i assume this is based on holding to maturity

I think ultimately i dont know how to understand the projected return at any given point (i.e. https://www.londonstockexchange.com/stock/T30I/united-kingdom/company-page ) how do i know what the current price is in relation to what i may see as a return in 2030 (given its current price ) I think the percentage increase is aprox 27% but from a high of aprox 50% in 2021 since inception but how do i work out what portions is interest, what is inflation etc and what portion is bond price change (and therefor projection)

if i has sold before maturity i would have got more if i sold in 2021 i presume, its forward estimation i cant understand (i know inflation is an unknown here)

apols for asking probably basic questions, but perhaps i just cant get my head around this

This will include the coupon and any capital gain/loss to return to par at maturity without inflation linking, so you can figure out how much of the overall yield is interest vs capital gain using the coupon divided by clean price (e.g. TR31 has a running yield of 0.125/95.28 = 0.13%, so another ~0.84% comes from capital gain, and the rest from inflation - or you can take the maturity price divided by current clean price and annualise, e.g. (100/95.28)^(1/5.76) = 0.84%).

Since you only know the price now and at maturity, you cannot predict what overall return you might get over periods in between.

regarding the running yield i get the running yield being 0.13% but where does the 0.84% come from in this case?

is this stating that between now and maturity I would get 0.84% on the lump sum, + 013% (currently?) + inflation so ~ 0.97% + inflation

looking at TR26 on that page which has a real yield~3.5% (but maturity in 135 days) but the current price is closer to 100 (vs TR31) there for the capital gain is less but a higher yield.

if i put £100 into tr26 today ould i be getting ~3.55% pro-rata over 135 days + 0.125% prorate over 135 days + inflation pro rata over 135 days

the_medium_bear

looks like money markets could be a good choice for safe returns (they did not get effected by the bond crash a few years ago) and really tied to interest rates + small fraction (which in principle could be eroded by inflation) but also potentially around the same types of return as index-linked guilts without the inflation protection

DRS1

the_medium_bear said:

masonic said:

the_medium_bear said:

Regarding that really usefull giltladder link.

So basically this shows what i could gain for each year for a given gilt, is that price guaranteed (i.e. the at a minimum getting my money back + the yearly interest + yearly inflation) if i held each one to maturity. I guess what i dont understand is the dirty price (which i understand includes accrued interest + inflation)  but how to i project any potential gain in the gilt price (could i get less if the price of the gilt falls or can i just assume if held to maturity it would at least get my principle back. and the plan here to to have multiple guilts maturing each year with a known value (and i assume this is based on holding to maturity

I think ultimately i dont know how to understand the projected return at any given point (i.e. https://www.londonstockexchange.com/stock/T30I/united-kingdom/company-page ) how do i know what the current price is in relation to what i may see as a return in 2030 (given its current price ) I think the percentage increase is aprox 27% but from a high of aprox 50% in 2021 since inception but how do i work out what portions is interest, what is inflation etc and what portion is bond price change (and therefor projection)

if i has sold before maturity i would have got more if i sold in 2021 i presume, its forward estimation i cant understand (i know inflation is an unknown here)

apols for asking probably basic questions, but perhaps i just cant get my head around this

This will include the coupon and any capital gain/loss to return to par at maturity without inflation linking, so you can figure out how much of the overall yield is interest vs capital gain using the coupon divided by clean price (e.g. TR31 has a running yield of 0.125/95.28 = 0.13%, so another ~0.84% comes from capital gain, and the rest from inflation - or you can take the maturity price divided by current clean price and annualise, e.g. (100/95.28)^(1/5.76) = 0.84%).

Since you only know the price now and at maturity, you cannot predict what overall return you might get over periods in between.

regarding the running yield i get the running yield being 0.13% but where does the 0.84% come from in this case?

is this stating that between now and maturity I would get 0.84% on the lump sum, + 013% (currently?) + inflation so ~ 0.97% + inflation

looking at TR26 on that page which has a real yield~3.5% (but maturity in 135 days) but the current price is closer to 100 (vs TR31) there for the capital gain is less but a higher yield.

if i put £100 into tr26 today ould i be getting ~3.55% pro-rata over 135 days + 0.125% prorate over 135 days + inflation pro rata over 135 days

You do manage to pick some bad examples.  TR26 is so close to maturity the figures go a bit funny.  In particular the inflation linking is (I think) 3 months behind so most of the inflation growth is already in there.

masonic

the_medium_bear said:

masonic said:

the_medium_bear said:

Regarding that really usefull giltladder link.

So basically this shows what i could gain for each year for a given gilt, is that price guaranteed (i.e. the at a minimum getting my money back + the yearly interest + yearly inflation) if i held each one to maturity. I guess what i dont understand is the dirty price (which i understand includes accrued interest + inflation)  but how to i project any potential gain in the gilt price (could i get less if the price of the gilt falls or can i just assume if held to maturity it would at least get my principle back. and the plan here to to have multiple guilts maturing each year with a known value (and i assume this is based on holding to maturity

I think ultimately i dont know how to understand the projected return at any given point (i.e. https://www.londonstockexchange.com/stock/T30I/united-kingdom/company-page ) how do i know what the current price is in relation to what i may see as a return in 2030 (given its current price ) I think the percentage increase is aprox 27% but from a high of aprox 50% in 2021 since inception but how do i work out what portions is interest, what is inflation etc and what portion is bond price change (and therefor projection)

if i has sold before maturity i would have got more if i sold in 2021 i presume, its forward estimation i cant understand (i know inflation is an unknown here)

apols for asking probably basic questions, but perhaps i just cant get my head around this

This will include the coupon and any capital gain/loss to return to par at maturity without inflation linking, so you can figure out how much of the overall yield is interest vs capital gain using the coupon divided by clean price (e.g. TR31 has a running yield of 0.125/95.28 = 0.13%, so another ~0.84% comes from capital gain, and the rest from inflation - or you can take the maturity price divided by current clean price and annualise, e.g. (100/95.28)^(1/5.76) = 0.84%).

Since you only know the price now and at maturity, you cannot predict what overall return you might get over periods in between.

regarding the running yield i get the running yield being 0.13% but where does the 0.84% come from in this case?

is this stating that between now and maturity I would get 0.84% on the lump sum, + 013% (currently?) + inflation so ~ 0.97% + inflation

Yes, your overall annualised return if held between now and maturity would be 0.97% + inflation, 0.84% of which would be a tax exempt capital gain.

the_medium_bear said:

looking at TR26 on that page which has a real yield~3.5% (but maturity in 135 days) but the current price is closer to 100 (vs TR31) there for the capital gain is less but a higher yield.

if i put £100 into tr26 today ould i be getting ~3.55% pro-rata over 135 days + 0.125% prorate over 135 days + inflation pro rata over 135 days

Over short periods like 135 days, it is unlikely you'll achieve what you think you'll achieve.

Currently index linking is based on August's RPI figure of 407.7 and September's figure of 406.1. Index linking will have a negative impact on returns this month. If year-on-year RPI inflation falls back to 3.5% in Dec 2025 vs Dec 2024, then that would put RPI at 405.8, which is also a decrease on August. So expect TR26 to have reached its peak in terms of index linking.

When you compare to the nominal gilt TG26 with YTM 3.7%, although it's got slightly longer duration at 257 days, you'll probably get a better return from that.