Buying gilts has become more popular among investors as the economy and interest rates have seen increased volatility. In this guide, we explain how to buy Government Gilts, what they are, where to buy them and the potential risks and rewards of buying “gilt-edge” government bonds.
Compare Brokers & Platforms For Buying Gilts
| Gilt Broker | Bonds Available | Gilt Dealing Commission | Gilt Account Fee | Our Rating | More Info |
|---|---|---|---|---|---|
 | 10,000+ | £11.95 (or £5.95 if more than 20 deals done in previous month) | 0.45% capped at £45 per annum | See Bonds Capital at Risk |
|
 | 10,000+ | £7.99 or £3.99 for “Super Investors” | £4.99 a month | See Bonds Capital at Risk |
|
 | 5,000+ | £9.95 (or £4.95, if you do 10 or more online deals in the previous month) | 0.25% capped at £3.50 per month | See Bonds Capital at Risk |
Our picks of the best gilt investment accounts
❓Methodology: Our experts chose what we think are the best investment accounts for buying gilts based on:
- Over 30,000 votes and reviews in the coveted Good Money Guide annual awards
- Our own experiences testing the gilt investment accounts with real money
- An in-depth comparison of the features that make them stand out compared to alternative investing platforms for buying gilts
- Our exclusive interviews with the gilt investment account company CEOs and senior management
Summary:
- Interactive Investor: Fixed Fee Gilt Investing
- AJ Bell: Best Platform For Low-Cost DIY Gilt Investing
- Hargreaves Lansdown: Excellent Added Value Investment Platform For Gilts
Interactive Investor: Fixed Fee Gilt Investing
- Gilt dealing commission: £7.99
- Gilt account fee: £4.99 a month.
Interactive Investor charges a low flat monthly fee for all their investing accounts.
About Interactive Investor
Name: Interactive Investor
Description: Interactive Investor or II as its known is one of the UK’s largest self-determined investor platforms. II can trace its roots back to 1995 and the startup floated on the London stock exchange back in the year 2000 before being bought by the Australian business Ample in 2002. Today, Interactive Investor is a owned by abrdn with assets under administration of more than £50 billion and 400,000 customers to whom II offers share trading and investment services including, ISAs SIPPs and share dealing, alongside research and analysis. Including model portfolios, selected funds and thematic investments.
Fixed fee investing on a wide range of investments
Interactive Investor differs from other investment platforms as it charges a fixed account fee, rather than a percentage of the funds you have on account. Which, over time, could save you thousands in costs.
Interactive Investor is a low-cost provider competing directly with the likes of Hargreaves Lansdown and AJ Bell offering general investment accounts, ISAs and pensions. In our Interactive Investor review, we explore the pros and cons of the platform and who it is suitable for.
Pricing: Brilliant for medium and large investors, expensive for small accounts.
Market Access: You’ll be hard-pressed to find something you can’t invest in.
Platform & Apps: Very good, excellent data and usability.
Customer Service: They are massive and mostly online, but you can call them directly, generally good.
Research & Analysis: Loads, daily and weekly updates across all the asset classes they cover, with lots of analysts and opinions. No advice service though.
Pros
- Fixed account fees
- Easy to use
- Good research
Cons
- No Lifetime ISA
- Expensive for very small accounts
- No derivatives for hedging
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Pricing
(5)
-
Market Access
(5)
-
Online Platform
(5)
-
Customer Service
(5)
-
Research & Analysis
(5)
Overall
5
Interactive Investor’s website will also show you a small list of gilts available to trade on the platform.
AJ Bell: Best Platform For Low-Cost DIY Gilt Investing
- Gilt dealing commission: £9.95
- Gilt account fee: 0.25%.
Capital at risk
AJ Bell is a well-established low-cost investment platform for buying Gilts.
About AJ Bell
Name: AJ Bell
Description: AJ Bell is an award-winning, low-cost online investing platform for UK DIY investors. Founded in 1995, AJ Bell has grown to become one of the UK’s leading investment platforms. Today, it has more than 440,000 customers and assets under administration (AUA) of over £150 billion.
Summary
AJ Bell is an excellent full-service stock broker that offers a wide range of services for investors, including share dealing, fund investing, cash-saving services, and mobile dealing. It also offers a range of accounts including Stocks and Shares ISAs, Lifetime ISAs, Self-Invested Personal Pensions (SIPPs), dealing accounts, and investment accounts for children.
Pros
- Wide range of investments
- Low account costs
- Discounts for frequent investors
Cons
- High charge when you deal over the phone
- High FX charges below £10k
-
Pricing
(5)
-
Market Access
(5)
-
Online Platform
(5)
-
Customer Service
(5)
-
Research & Analysis
(4)
Overall
4.8
Hargreaves Lansdown: Excellent Added Value Investment Platform For Gilts
- Gilt dealing commission: £11.95
- Gilt account fees are 0.45%
Capital at risk
Hargreaves Lansdown has an excellent free-to-view market data portal where you can view bond and gilt prices.
Expert Review
Name: Hargreaves Lansdown
Description: Founded in 1981 Hargreaves Lansdown is one of the largest investment platforms in the UK. They offer investing, savings, ISAs and SIPP account to over 1.8 million clients with 142bn in assets under management.
Is Hargreaves Lansdown a good broker?
Yes, Hargreaves Lansdown is one of our best-rated stock brokers and investment platforms. HL offers access to a huge range of investment types, through a wide range of general and tax-efficient accounts and is suitable for almost all types of investors.
I always think of Hargreaves Lansdown as the Waitrose of the investing world. Yes, it may be a bit pricier sometimes, but I think it’s just a nicer, safer place to shop for stocks.
Pros
- Wide range of investments and accounts
- Top-notch customer service
- Excellent research and analysis
Cons
- There are cheaper options for fund investing
- Limited portfolio hedging tools
-
Pricing
(4.5)
-
Market Access
(5)
-
Online Platform
(5)
-
Customer Service
(5)
-
Research & Analysis
(5)
Overall
4.9
How To Buy UK Government Gilts
You can buy UK Government bonds either directly from the DMO or through various bond brokers (see here for US ones) and investment platforms.
The process for buying gilts is:
- Search for a Gilt that fits your investment criteria and look up the symbol for that instrument (for example TR60 for the 4% Treasury Gilt 2060) .
- Be careful to note the coupon payment (normally in percentage), maturity date, and current prices.
- The price you purchase will determine your overall return. Gilts are issued at £1, but go up and down based on the Bank of England interest rates and how risky they are considered.
- Gilts are redeemed by the Treasury at £100 (known as “par”). Gilt investors make money via a combination of coupons and capital gains at maturity.
Alternative ways to buy Gilts:
If you are only interested in speculating on the price of gilts, then Saxo or IBKR offer Gilt derivatives.
- Saxo – Saxo is for advanced and professional investing. Bond dealing commission: 0.2% to 0.05%. You can only trade Gilt, futures or ETFs on Saxo Trader GO.
- Interactive Brokers – You can’t trade individual UK gilts on the IBKR portal, but you can buy Gilt ETFs, which give you access to a range of Gilts.
Alternatively, you can also buy and sell leveraged gilt funds. For example, the Wisdomtree Leverage 3x 10-year Gilt ETF (3GIL) is a high-octane vehicle for traders. The fund moves three times the daily movement of the Long Gilt Rolling Future Index. For obvious reasons, this ETF is not really suitable for every trader, especially investors with conservative financial objectives.
- Expert analysis: Are gilts a good investment?
Important factors to consider when buying gilts
When we talk about buying government bonds like gilts, we focus on a few important factors, like:
- Current yields – how much is the bond offering investors now?
- Maturity – how many more years do the debt instrument last?
- Credit ratings of the borrowing entity – is the organisation financially viable and has the means (taxes) to repay the debt?
As you can see above, gilts of different maturities offer different yields.
Assuming the credit rating of the UK government remains strong for the time being, which it is (see below), the two important factors are yield and maturity. How long do you intend to hold the debt for? Is the yield compensating investors sufficiently for the risk?
Source: worldgovernmentbonds.com
Recent data from bond brokers like Interactive Investor show that investors are picking up the near-term gilts (those maturing within 24 months). Yields are high; holding period short. A good parking place for surplus capital.
More crucially, in this volatile market there are two additional factors to consider:
- Trend of interest rates – Will interest rates drop further in the coming months? If yes, it tends to buoy gilt prices.
- Real interest rates – Will nominal rates compensate investors enough for the still-positive inflation?
Inflation this year (2024) has fallen to about 2 percent (1.7% in September ’24). This led to a couple of Bank of England rate cuts (latest 25bps cut in November) to match the fall in inflation. Wide volatility in economic trends are causing huge changes in financial markets. Against this backdrop the central bank is cautious not to cut too aggressively in case inflation rebounds.
Gilt ETFs for your portfolio
Average investors need to diversify. In doing so, it reduces the overall portfolio risk. Asset diversification balances the risk.
With near-term gilt yields (3-6 months) now at 4-5 percent, interest in the sector is high. However, instead of buying individual gilts, a portfolio of gilts may be more appropriate for some investors.
For example, the iShares 0-5 year Gilt (IGLS) is an exchange-traded fund (ETF) that holds a portfolio of gilts with maturities ranging from 0 to five years. According to its factsheet, more than two-fifth of IGLS’s £3.1 billion gilt portfolio matures within 24 months. A bond ETF, like many equity ETFs, may track a bond index. Here IGLS tracks the “FTSE UK Conventional Gilts – Up To 5 Years Index“.
From a high of 135, the ETF plunged to 122 due to the surging interest rates before staging a recovery rally. Recent price action has flatlined due to a modest rise in interest rates. Right now, the ETF’s yield-to-maturity fetches about 4 percent.
Another ETF that may interest readers is the iShares Gilt ETF (IGLT). This £3.1 billion bond fund (factsheet here) follows the “FTSE Actuaries UK Conventional Gilts All Stocks Index (link)”.
There is another sector that may be worth a look – index linked gilts. These bonds are linked to the price index Retail Price Index (PRI). Coupons and principal of the bonds are adjusted according to a set formula using the RPI index. These adjustments help to offset the erosion of buying power of capital. You can find out more about index linked gilts from the Debt Management Office (DMO).
There is a bond ETF that holds just indexed linked gilts. This is the £718 million iShares index-linked Gilt ETF (INXG, factsheet here). Due to the long-maturity of its gilt holdings (one-third in 20+ year maturity), the bond fund is particularly volatile. In 2022, the ETF’s total return was a shocking -34 percent. In the US, the equivalent is the TIPS Bond ETF (TIP).
How do government gilts work?
Gilts are government bonds, which is a financial instrument with a promise – a promise to pay certain sums periodically (‘interest’) and the original capital in the future. In this case, the debtor is the UK government.
It works like this. The UK government borrows money from the market to spend; it then raises revenue from the economy via taxes; and uses the tax revenue to repay interest and capital to the creditors.
Sometimes, the government will use new borrowings to retire old borrowings when it is cheaper to do so. The most recent statistics (April 2024, data published annually) show the total UK debt borrowings at the end of 2023 to be £2.7 trillion. As a percentage of UK’s GDP, this ratio is about 101 percent (see below, recent report). Fiscally-prudent investors will think this is too high. Germany, they point out, has the debt-to-GDP ratio of about 64 percent. But as long as the market thinks the UK government has the ability to re-finance these debt instruments, there is no reason to panic.
Source: ONS (Apr 2024, annual figures)
How safe are government gilts?
Not all sovereign debtors are equal. What differentiates sovereign bonds are the rate of interest, collateral, duration, debt levels, and the credibility of borrowers.
Another important point is the absence of military conflicts in that region, since conflicts will disrupt trade, investments and capital flows.
Creditors certainly want to borrow from sovereign governments that can repay. This ability to repay is measured crudely by sovereign credit ratings. Third-party professional firms called rating agencies (Standard & Poor’s, Fitch, and Moody’s) assigned these ratings to nearly all governments that issue bonds. The UK has enjoyed good ratings in recent years. The chart below compares the S&P sovereign ratings across the world. The UK is currently double A investment grade (2024).
In September 2024, Fitch reaffirmed UK’s sovereign ratings at AA-.
Source: S&P/Wikipedia (March 2024) – click link and see individual rating changes
What is the relationship between gilt yields and price?
The relationship between bond yield and price is simple: They move in the opposite direction. Look at the chart below. Here I use a US bond ETF (IEF) as an example.
As US bond prices dropped (blue line), the 10-year bond yield rose (orange line). In other words, the higher the bond yield, the lower the price.
Generally speaking, shorter-maturity government bond yields (maturities of less than two years) track the central bank policy rate closely.
This means that as central bank raises the policy rate, these 0-2 year yields rise too – and vice versa. Longer maturity bonds, however, may not track the policy rate that closely for a variety of reasons, including inflation expectations.
- Further reading: You can read more about how bonds work here in our bond guide.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
You can contact Jackson at jackson@goodmoneyguide.com
