Government consulting on ways to incentivise greater retail investor take up of T Bills?

poseidon1

https://www.gov.uk/government/consultations/consultation-on-the-uk-treasury-bill-market

See below a key extract from the consultation document identifying the Government's rationale behind seeking greater retail investor partipation in T Bills, to reduce reliance on more expensive medium/long term gilt financing - 


  " 2.18 The government is interested in exploring options that could

promote higher participation at T-bill primary market operations, which

could facilitate an expansion and deepening of the overall T-bill market.

It is envisaged that a more active secondary market in the instrument

could also increase demand at tenders, which may support the case for

T-bills to play a larger role in the government’s debt financing

programme. "


With regard to greater retail investor participation, the investment platforms are being asked the following questions:


"  B: T-bill investor base (retail)

6. What existing measures are there which may promote

investment in T-bills by retail customers? Are these widely taken

up?

7. What measures could the government take to incentivise or

promote investment in T-bills by retail customers? How might this

affect retail investment in gilts?

8. What risks to the government or the market could arise if the

government were to take measures to incentivise or promote

retail investment in T-bills and how would these best be

mitigated? "


Seems to me any move to increase the uptake of T Bills at the expense of medium/long term gilts maybe of specific concern to Sipp investors.


It's a  very short consultation period to end of February 2026 with any changes to take effect 2026/27.

m_c_s

So they want to encourage more of us to buy short term and cash like UK government debt (T bills) but will then likely ban cash like (T bills) investments from S&S ISAs; incoherent strategy.

MK62

Difficult to see the logic behind this move, given that the government will soon be banning such investments (cash or cash-like) from probably the most likely place they would have been used.....stocks and shares ISAs......and due to the different tax treatment to gilts, it's unlikely a retail investor would bother with them in a GIA.....so that leaves SIPPs (few workplace or personal pensions offer discrete investment in these...or even gilts for that matter).......but as STMMFs/MMFs will still be available to SIPP investors I'm not sure T-bills would have that much appeal to most, given the way they are traded (auction style) and the restrictions once bought (unless, of course, changes are made).

poseidon1

All very good points especially with regard to banning cash like investments for ISAs, unless the 'incentive' on offer is a specific exemption for T Bills held in ISAs.

Be interesting to see what the 'incentives' might actually look like, to try and attract cash savers to T Bills.

The fact you need to be on the very  limited number of DIY investment  platforms to access them in the first place, is already a significant disadvantage in widening the appeal ,whilst the seasoned investors who are already aware  rarely appear to be attracted to them compared to say STMMFs. 

I have bought a few in the past for ISA/Sipps, but apart from being able to acquire and redeem cost free, the returns were not such to encourage regularly participating in each and every auction.

LHW99

Sorry for my ignorance, I thought T-bills were exclusively US investments.

What do UK T-bills offer that differs from short dated gilts?

ColdIron

LHW99 said:

Sorry for my ignorance, I thought T-bills were exclusively US investments.

What do UK T-bills offer that differs from short dated gilts?

T-Bills or Treasury bills are very short dated, typically 3 or 6 months. There is no secondary market for them so you buy them at issue and redeem at maturity. They're zero coupon but issued below par so all the return comes from the increase in price. As deeply discounted securities the return is treated as income not capital gains

So same same but different

I keep a few years of cash on hand in my SIPP and have built a ladder of them maturing each month simply because they pay a better rate than my platform does for cash. No tax, free to buy, free to dispose and with a cap on charges free to hold. They have some uses but are quite niche

Albermarle

ColdIron said:

LHW99 said:

Sorry for my ignorance, I thought T-bills were exclusively US investments.

What do UK T-bills offer that differs from short dated gilts?

T-Bills or Treasury bills are very short dated, typically 3 or 6 months. There is no secondary market for them so you buy them at issue and redeem at maturity. They're zero coupon but issued below par so all the return comes from the increase in price. As deeply discounted securities the return is treated as income not capital gains

So same same but different

I keep a few years of cash on hand in my SIPP and have built a ladder of them maturing each month simply because they pay a better rate than my platform does for cash. No tax, free to buy, free to dispose and with a cap on charges free to hold. They have some uses but are quite niche

So if you bought a 6 month one for example, how much below par would it be at the moment? In other words what would the annual return be compared to a 6 month notice savings account? ( currently best one is 4.5%)

ColdIron

The annualised yield of the six I bought so far were:

4.01

4.03

4.02

3.96

3.86

3.78

You can get better rates with notice/fixed/easy access savings accounts but within a SIPP these are not available to me. As I say I am using them as the rates are better than I can get for cash within the SIPP. No tax, no cost or fees and a guaranteed known return
I wouldn't use them in a GIA, don't have excess cash in my ISAs but in the SIPP they solve a problem/fill a gap for me

poseidon1

I focussed on 3 month T bills, my last ( 3 months to March 2025) had an annualised yield of 4.66%. By comparison an Oxbury Bank 3 month bond around the same time yielded 4.8%.

michaels

Do they return better than mmf? Perhaps after dealing costs and funds fees?

ColdIron

michaels said:

Do they return better than mmf? Perhaps after dealing costs and funds fees?

That would depend upon the MMF, the sums involved and your objectives

A MMF may (or may not) have a higher rate but that's only part of the overall return

My SIPP is with HL and I benefit from the £200 cap. An ETF would cost me £11.95 to buy and £11.95 (monthly) to sell but no cost for holding. Remember I am using a ladder of them to free up money for drawdown. An open ended fund would be free to buy and sell but the 0.45% on my £42,000 would be £189

The T-Bills have £0 costs associated with them

Like most things it works for some (me) but may not for others. You would need to do your own sums