Should I Delay Buying Gilt Ladder

Linton

ISTM people are making ILGs far more complex than is required. Why not just use the clean price and think in terms of numbers of £100s rather than numbers of gilts. If you buy and sell when the clean price is £100 you will get the inflationary gain on £100 with the coupon rate of interest

The dirty price is irrelevant. If you try to use it you may well get very confused when trying to compare 2 gilts with different starting dates but similar maturity dates. Working with clean prices makes such caclculations simple.

tigerspill

https://forums.moneysavingexpert.com/discussion/comment/81998027#Comment_81998027

I think you have maybe misunderstood the ILG pricing?

There are two prices - clean and dirty. The clean price does not include any indexing from issue to date and can be compared with the par price of 100.

The dirty price (what you actually pay) includes any indexing to date so obviously this will be higher in the par issue price as inflation increases to date are included. The dirty price will move around as the ILG is traded until maturity. Also, higher coupon ILGs will also cost more as they pay a larger coupon

I look at two things - the clean price compared with 100. Less than 100 and it will retain a slightly better value than inflation. I also look at the yield to check this is over zero.

Not sure I have explained this well.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81998232#Comment_81998232

Agreed. One thing though - what about T30I 4.125% IL where the clean price was around 343 when I bought it.

In addition, I assume if inflation rapidly rises, then maybe on maturity T27 - clean of 103 when I bought - may not have negative yield on maturity?

dawsonrm

Maybe I'm looking at it the wrong way but I'm not really interested in the clean/dirty prices etc, but as a whole I'm just looking at the cost to secure a guaranteed inflation proof income for x number of years. If that seems good value than that is the decider for me

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81998363#Comment_81998363

Then using the lategenxer gilt ladder tool is the thing for you. The only thing I don't like is it sometimes puts you in an ILG with a clean price over 100 which just feels wrong. But it is probably a factor of there being a very limited number of ILGs maturing at appropriate times if you are looking for annual income from the ladder.

ali_bear

I was recently looking at building an ILG ladder and using that tool, to bridge the gap until state pension kicks in. But then it dawned on me that I don't really need the regular income the ladder is designed to provide - I just wanted to inflation-proof some of my TFC (in a general investment account). So I invested the money in a couple of low-coupon ILGs (T29 and TR31) intending to hold to maturity.

OldScientist

https://forums.moneysavingexpert.com/discussion/comment/81998415#Comment_81998415

Although the gilts with clean price greater than 100 will contribute a larger cashflow in the form of coupons - in other words, they help to reduce the number of gilts required earlier in the ladder.

Linton

https://forums.moneysavingexpert.com/discussion/comment/81998363#Comment_81998363

Using the clean price will give you what you what you want. Say a particular IL gilt clean price is £50 and the coupon 1%. If you spend £1000 then at maturity you will get close to £2000 lump sum inflation linked since the purchase and an ongoing annual inflation linked interest payment of £20 half paid out each 6 months.

Linton

https://forums.moneysavingexpert.com/discussion/comment/81999303#Comment_81999303

Surely if the clean price is greater than £100 you get fewer gilts for a given lump sum and therefore you earn lower interest than the published coupon rate.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81999303#Comment_81999303

Yes But I think that may apply to conventional gilts more than ILGs none of which have what I would call a high coupon. I suppose you could say it about T32 (coupon of over 1%) but what about T28? That has a coupon of 0.125% and a price just over 100. And a real yield of -0.232%. Left to my own devices I wouldn't want to buy that one.