... The Safety of Gilts ...

This description excludes index-linked (which we do not recommend) and undated stocks.

* the values of these are set by the price you pay to buy

The price at which you buy and sell is a percentage of maturity (also known as repayment, or nominal) value. If you buy above 100 (par value) you get extra income for the capital foregone, while if you buy below 100, you get a tax-free capital profit instead of the extra income.

A 5% coupon bought at 100 (par) pays 5% on what you spend (excluding costs) whereas if it is bought at 110 ( above par) it pays 4.55% on what you spend (i.e. {coupon x 100}/price). If bought at 95 (below par) it pays 5.26% on what you spend.

Income is paid semi-annually on pre-set dates.  All Gilt income is taxable irrespective of the payment option you choose, unless you are a non tax payer. There is no Capital Gains Tax.

New issues are advertised in the Financial Times and Sunday Telegraph, but some are unsuitable for private investors. Generally, buy through a bank, stockbroker, or portfolio manager in the market.

Market prices are a complex function of interest rate prospects, inflation prospects, and sentiment. The market is dominated by actuarial needs and is sophisticated. Price changes anticipate inflation and interest rate changes by months, sometimes by years; reacting to news is usually unwise.

The income and repayment guarantees of Gilts are absolute, because they are given by the Government, which is safer than "income" products depending upon share prices. As long as you buy and hold, you have certainty - you know exactly where you stand for both income and capital.

See also the notice on the homepage.