Financial Services > Investments > Gilts


You may have heard the term 'gilt-edged securities'.


This term specifically applies to loans to the British government because they are completely safe.

No British government has ever failed to repay its debts for the simple reason that it just collects more money from you and the rest of the UK population in taxes to meet its obligations.

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With no risk other than the effects of inflation to worry about, the level of interest paid on those loans will always be modest.

For convenience purposes all gilts are grouped into one of four categories: short term, medium term, long term and undated, which means that the government will repay the debt when they feel good and ready to do so.

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Please be very careful about this last form of investment. During the Second World War a claim was made upon the patriotic instincts of everyone within the UK to lend money to the government for the war effort, and these War Loans were undated. Precious little interest (it is actually called a coupon) was to be payable upon those loans because 'it was all for the common good' but no government since has felt the need to repay that debt to this day. Thankfully there are now only a tiny number of pensioners who are suffering through this.

As owners have died their families have sold the gilts into the market suffering heavy losses and so the vast majority of the War Loans are now held by the managers of collective investment schemes. From their point of view the ability to buy the gilt very cheaply has the effect of improving the yield received to a far more acceptable level, but it does call into question the morality of successive governments who did have the opportunity to repay the financial debt owed to the many who leapt to the defence of this country.

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New issues of gilts are available directly through the Post Office to any investor. Existing gilts can be bought through Corrigans, a stockbroker or the National Stock Savings register - but it is often far more effective to buy a wide variety of gilts through a collective investment scheme such as a Unit Trust, Open Ended Investment Company (OEIC), UCIT, SICAV, ICVC, Investment Trust or even a Capital Investment Bond.