Too late to start gilt ladder? Opinions please.

watt66

Hello, I have recently played around with lategenxer and realised I could probably retire on a higher income from a gilt ladder than my current salary!. Any how, whats the consensus in setting up a ladder to provide 1 annual maturity over the next 7 years (SP kicks in 2033), with the first one maturing in April 2026. I realise the yields are low with shorter duration, is it too late to start? Thanks

QrizB

It's never too late!

Could you share a bit more of your plan?

watt66

Hi QrizB,
Approx. £300k in two SIPPS, around 80% equities in total. Looking at £28k pa, index linked from 2026 to 2033, SP kicks in then, so £7.5K pa for 15 years. This takes me to 82. I have around 4 years salary at the moment in cash savings (ISAs high interest etc). The cost for the gilt ladder comes in around £290k

SVaz

I worked out that I was better off / neutral with a short term money market fund for a similar time frame,  as long as rates stay above 3%.

Given that the OBR expect rates to be around 5% by 2028,  I’ve taken that gamble but then my amount is only £12k for 5 years from 2028-32. 

I’ve done a 5 Gilt ladder from 2034-38 though with an average 4.6% coupon

watt66

Yes, yield is around 3.2% for the gilts and stmm funds slightly more. Accept annuities pay higher, but would prefer to conserve savings should death come early.

ali_bear

I don't know how it would be too late to start one of these. 

I have considered using an index-linked gilt ladder to bridge the gap to state pension. Using part of my TFLS to provide an equivalent (but not taxable) income equivalent to the state pension up to when I start receiving that. 

zagfles

SVaz said:

I worked out that I was better off / neutral with a short term money market fund for a similar time frame,  as long as rates stay above 3%.

Given that the OBR expect rates to be around 5% by 2028,  I’ve taken that gamble but then my amount is only £12k for 5 years from 2028-32. 

I’ve done a 5 Gilt ladder from 2034-38 though with an average 4.6% coupon

What inflation rate are you gambling on?

MallyGirl

ali_bear said:

I don't know how it would be too late to start one of these. 

I have considered using an index-linked gilt ladder to bridge the gap to state pension. Using part of my TFLS to provide an equivalent (but not taxable) income equivalent to the state pension up to when I start receiving that. 

Same here - just making sure I fully understand them first

Dead_keen

It's not too late to start one.  lategenxer is great as helping you but beware that (i) it doesn't take account of fees (e.g. nearly £12 to buy each gilt with HL), and (ii) the price shown is not the "live" bid price of the gilts that you will pay.  This means that your cost (or the number of gilts bought) will be a bit different.  So you need to decide how you will manage that. 

I don't know how platforms other than HL work, but with HL it can be a bit daunting the first time you buy some gilts as you might be expecting to buy, say 180,197 units of 0.375% 2026-10-22 T26A at 97.23p with a total cost of £18,400.62.  That's a lot of different numbers!  You press the buttons only to be told that the price you are able to accept in the next ten seconds is 97.33p.  Is that right? Is it too much?  Did you type in T26A and £18,400 correctly or should it have been TG27 and £18,083 of them?  Don't be afraid to let the ten seconds go by, double check your numbers and try again.

I am confused by your numbers.  I assume you want seven years at £28k and 8 years at £7.5k (plus whatever inflation you choose).  But I'm not clear.  I've not tried lategenxer that way but I guess you are just uploading a CSV file to it.

Whether this is a good strategy or not, I am not sure.  It works well for me but I am comfortable with the cash I want each month and my optimum tax strategy.  My ladder is in my SIPP and the amount I receive each month is fully taxable.  But if you have the potential to take a tax-free lump sum, have ISA capacity, cash outisde of a SIPP, and didn't use your full personal allowance each year, there might be less simple ways of structuring things that improve your tax position and so make things cheaper to get the same net of tax amount.

For those who want to understand a gilt ladder, I'd suggest playing with: https://lategenxer.streamlit.app/Gilt_Ladder and experiment.  For example, choose a ladder of £10,000 per year for three years and see what it suggests you buy.  Some numbers will appear by magic and that doesn't help me understand a gilt ladder.  To get to grips with it better, export the Excel file and look at the cashflows to see what is happening.  Once that becomes clear, experiment and make things more real-life for you.

SVaz

I’m not gambling on inflation as it’s not relevant,  my military pension is CPI based and our income will be completely tax free to SP age in 2033 as she’s emptying her Sipp into ISAs and has enough cushion to fluctuate,  if stuff is 20% more expensive by 2032.  I’ll continue to use her marriage allowance and stick to £13800 taxable plus 25% tax free. 
The only fly in the ointment, as of yesterday, is the extension of the threshold freeze,  really could have done without that but hey-ho, we’ll just use more savings if we have to. 

watt66

Dead_keen said:

It's not too late to start one.  lategenxer is great as helping you but beware that (i) it doesn't take account of fees (e.g. nearly £12 to buy each gilt with HL), and (ii) the price shown is not the "live" bid price of the gilts that you will pay.  This means that your cost (or the number of gilts bought) will be a bit different.  So you need to decide how you will manage that. 

I don't know how platforms other than HL work, but with HL it can be a bit daunting the first time you buy some gilts as you might be expecting to buy, say 180,197 units of 0.375% 2026-10-22 T26A at 97.23p with a total cost of £18,400.62.  That's a lot of different numbers!  You press the buttons only to be told that the price you are able to accept in the next ten seconds is 97.33p.  Is that right? Is it too much?  Did you type in T26A and £18,400 correctly or should it have been TG27 and £18,083 of them?  Don't be afraid to let the ten seconds go by, double check your numbers and try again.

I am confused by your numbers.  I assume you want seven years at £28k and 8 years at £7.5k (plus whatever inflation you choose).  But I'm not clear.  I've not tried lategenxer that way but I guess you are just uploading a CSV file to it.

Whether this is a good strategy or not, I am not sure.  It works well for me but I am comfortable with the cash I want each month and my optimum tax strategy.  My ladder is in my SIPP and the amount I receive each month is fully taxable.  But if you have the potential to take a tax-free lump sum, have ISA capacity, cash outisde of a SIPP, and didn't use your full personal allowance each year, there might be less simple ways of structuring things that improve your tax position and so make things cheaper to get the same net of tax amount.

For those who want to understand a gilt ladder, I'd suggest playing with: https://lategenxer.streamlit.app/Gilt_Ladder and experiment.  For example, choose a ladder of £10,000 per year for three years and see what it suggests you buy.  Some numbers will appear by magic and that doesn't help me understand a gilt ladder.  To get to grips with it better, export the Excel file and look at the cashflows to see what is happening.  Once that becomes clear, experiment and make things more real-life for you.

It is 7 years from age 60, then 15, taking me to 82 years of age when chat GPT says I am likley to expire!.