Where to invest £100k today?

itsme999

https://forums.moneysavingexpert.com/discussion/comment/82076498#Comment_82076498

For the Treasury TG35 maturity 2035 at HL site, it says app £68 buy price, coupon 0.625% and Yield to maturity 5.01%:

1. Does this mean £68 is the capital invested and could go or up or down at the end of the period?
2. Are the Coupon % and Yield % also subject to change during the ownership of the guilt?
3. If I invest £100k today, is the yield calculated annually or at the end of the term?
4. I can't find the face value of the gilt?

Thanks

wmb194

https://forums.moneysavingexpert.com/discussion/comment/82076643#Comment_82076643

The par value of all gilts is £100 or £1. Its value in the market can vary but you'll always receive £100/£1 at maturity so when you buy a conventional* gilt and hold it to maturity your returns are locked in and you know what coupons you'll receive and your gain/loss at maturity. The yield calculations are effective annual rates and the sequence of returns might be different e.g., in this case most of the gain is at the end of the term.

*As opposed to index linked gilts which are more complicated.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82076643#Comment_82076643

1. No, it means you buy the gilt for £68 (or close to, depending on whether it's clean or dirty price quoted, plus some small bid/offer spread) but at the end of the period the government will pay you back £100. This uplift is capital gain and tax free.
2. No, once you've taken ownership they are fixed if held to maturity (and coupon % is fixed full stop), because yield is calculated from your buy price and the fact the government will pay you back £100.
3. It's calculated at the point of purchase and assuming you hold to maturity - yield is a combination of the coupon payments (bi-annual) and the increase in capital on maturity (in this case, 2035).
4. All gilts are £100
   

Note I've said hold to maturity several times - you are free to sell them before then (just as you are to buy them now) at which point you won't necessarily get back the £100 face value and therefore the yield that was calculated at purchase, but instead whatever the market views as the correct price for the remaining time, which might be more or less than the government will pay you at maturity.

itsme999

Thank you wmb194 and Investor Jones

I think I got the gist of the gilts, pls confirm my understanding:

If I invest £100k in GT35 at £68 per unit today; I will get coupons twice year at 0.625% for 9 years and I will get roughly £150k in July 2035 and the £50k is tax free. There is no more to it if I leave the gilt until 2035.

QrizB

I will get coupons twice year at 0.625%

You'll get coupons twice a year at 3.125p for every gilt you buy. While gilts have a face value of £100, you're only paying £68 so your £100k will get you almost 1500 gilts.

(100000 /68 x 3.125p) is about £46, so you'll get £46 twice a year.

itsme999

https://forums.moneysavingexpert.com/discussion/comment/82076786#Comment_82076786

1. At end of term 2036, I will get paid:1500gilts * £100= £150,000 and the £50,000 CGT is tax free?
2. The calculation of the coupon per year per gilt: 0.625 * £100 (face value) /100=£0.625= 62.5p or 31.25 twice a year for every gilt. no?