Is what I am doing sensible? What would you do

BobR64

After reading this thread, I went to have a look at the ILG prices at HL:

https://www.hl.co.uk/shares/corporate-bonds-gilts/bond-prices/uk-index-linked-gilts

They all seem to be the clean prices, consistent with what has been discussed in preceding comments, in that they are round about 100 for ones close to maturity or less than 100 for longer maturities - except for the last two, which are 2035 and 2030 and have prices of about 240 and 340 respectively.

Is this just a glitch, and it's actually showing the dirty price here, or is there something different about these gilts?

hara____

https://forums.moneysavingexpert.com/discussion/comment/81981208#Comment_81981208

Those are the only two remaining 'old style' index-linked gilts: they operate with an 8 month lag to inflation, rather than 3 month, and as you've identified you normally see them quoted as a dirty price rather than a clean price. Oddly enough, they are also the only two linkers that you can trade online with HL.

They are mentioned, briefly, in the earlier Monevator link:

How to buy index-linked gilts - Monevator

QrizB

By the way, if you are opting for ii, be aware of the limitations compared to AJ Bell: I think you still to phone to trade linkers and ii will show you the clean price in portfolio valuations after you have paid the dirty price, falsely indicating a large loss on some linkers.

My Scottish Widows (ex-Zurich) GPP does the same. It's not big deal as long as you understand what's happened.

coyrls

Although you have to phone ii to trade ILG, you pay the online trade price not the phone trade price. For your own records it's best to record the dirty price that you pay and the accrued interest, as the contract note they provide is rather opaque and combines everything as accrued interest above the clean price. As has already been said your portfolio view will display the clean price and show the difference between the clean and dirty price you paid as a loss.

Mistermeaner

thanks all i have accounts already with both II (S&S ISA) and AJ Bell (LISA) so i'll do the SIPP with AJ Bell

Mistermeaner

hi all

just waiting for my partial transfer of 200k from my work place pension to aj bell to complete then I’m going gilt shopping

I think I’ve got a much better understanding now thanks to you guys

Maybe just looking for reassurance but looking at the 2037 index linked gilt that will mature shortly before I can access my pensions

Info from AI:

As of May 6, 2026, the prices for the 1⅛% Index-linked Treasury Gilt 2037 (Ticker: TR37, ISIN: GB00B1L6W962) are:

• Clean Price: £93.86
• Dirty Price: £190.720 

If I understand correctly if I bought today i would pay £190 as it has been inflated since launch. It would pay me 1&1/8 % interest each year and continue to rise by rpi until maturity at which point I get back its rpi adjusted value. So if just hypothetically rpi is just under 1% per annum it would go up by roughly 10% (ignoring compounding) and therefore be worth approx £209 (ie have gone up by £19)

is all this correct?

the bit I just can’t get my head round is the clean price quoted at £93 - does this mean that it is heavily discounted? But why? Is the seller making a loss and if so why are they selling?

These things just seem too good to be true (albeit somewhat complicated)

Secret2ndAccount

It's cheap because it only pays 1⅛% interest. People think they could get more elsewhere. So it is underpriced in order to give you another 6% return (works out ~0.5% per year). The 1⅛% is paid on the basis of a £100 clean price, not the £94 you pay for it, so you will actually get more than 1⅛%. So 1⅛% x 100/94 x inflation. About £2.30 per year currently, for your £191.

If you buy it at £94 clean price, then you sell it in a year's time for £97, have you made gain or a loss? This gilt might never have been priced at £100. It would have been initally sold at auction where it might have fetched more or less than £100. If there was zero inflation it would return £100, but the clean price goes up and down according to inflation and demand. In a period of high inflation, people might pay more for index linked gilts. If inflation was low, the gilts would drift down in price. As you get towards the maturity date, the clean price will gravitate towards £100, since it will, at the end, pay out £100 plus inflation

If you buy it and hold it to maturity, you will make 6% profit, plus an annual return of 1.2%, both uprated by inflation between now and then.

DRS1

If you buy it and hold it to maturity, you will make 6% profit, plus an annual return of 1.2%, both uprated by inflation between now and then.

I could be wrong but I think it is a bit better than that. For the 6% profit (ie the difference between the clean price and 100) I think you get all the inflation since inception up to maturity. For the clean price bit you get future inflation from purchase up to maturity. With the 3 month lag of course.

I am sure someone did a picture illustrating this but I can't find it now.

hara____

Another perspective that might help:

T38 is available with a coupon of 1.75%. So why would anyone ever want to buy TR37 with its lower coupon of 1.125% ?

The answer is that they'll only buy TR37 if the clean price is discounted relative to T38, to account for the lower coupon.

Fundamentally it's the same point made by Secret2ndAccount, but maybe thinking of it as one gilt versus another is useful.

ali_bear

Low-coupon index-linked gilts are useful outside of a pension or ISA wrapper, because you only pay income tax on the coupon, not the capital growth which is where the inflation protection comes.