Gilts and Corporate Investment Bonds

Here we explain more about specialist investment products that are available in the UK

Gilts and Corporate Bonds are loans made by an investor to the government (gilts) or a company (Corporate Bond).

In principle, in return for providing the loan the government or company will pay interest and will repay the initial capital when cashed in.  

Gilts  

Governments use gilts to raise money and they are an extremely safe and low volatile form of investment . You can purchase fixed interest gilts or index-linked gilts.    

A good way of accessing gilts is via a unit trust  whereby a fund manager holds a portfolio of gilts on behalf of a large number of investors. These type of gilt funds can also be held in a ISA, which means all interest paid is free of tax.  

Corporate Bonds  

Corporate bonds pay a fixed rate of interest and have a redemption value.   Key features of corporate bonds:  

-         Corporate bond prices are more volatile than gilts

-         Due to increased risk, they offer a higher return than gilts

-         There is always the possibility that a company will not be able to repay the loan  

Again the best way of accessing corporate bonds is via a collective investment whereby a fund manager holds a portfolio of corporate bonds on behalf of a large number of investors.  

Why not visit our dedicated Retirement pensions website and learn more about Cashing in your pension plan or if you are uncertain about the investment value / potential Transferring pension plans. You may simply want an overview of the options available for Starting a pension plan - we can help with any of these financial advice areas.

Speak to us today for advice on all your investment needs    

Winston Solicitors launch Law Chat, a law blog written by lawyers discussing the hot legal topics of the day - 22nd October 2008