An alternative for the 4% rule.

Key Information
ISIN GB00BT7J0241
TIDM T56
Exchange LSE
Par Value £100
Maturity Date 31/1/2056
Coupons per year 2
Next coupon date 31/7/25 e
Coupon 5.375%
Income Yield 5.39%
Gross redemption yield 5.38%

An alternative to using the 4% rule would be to buy a gilt ladder or a U$ Treasury ladder.

Pointers to know.

If you buy a gilt below or around its issue price, with a gilt it’s £100, you will not lose any of your hard earned if you own until maturity.

Using the table above.

The yield is 5.38%, so you would receive two income payments a year.

If you hold until 31/01/2056, you will receive your cash back without taking any action. Between now and 2056 a lot will happen with interest rates.

If they continue to fall, you should be able to flip your position at a profit. Although you might find it difficult to re-invest the funds at a decent interest rate.

If/when interest rates rise, the price of your gilt will fall and you will be locked into your position, although you could then add to your position at a better rate than 5.38%

In general if your want to buy gilts outside a tax free wrapper, you need to buy a low coupon as any capital gains are tax free.

Key Information
ISIN GB00BL68HH02
TIDM TG30
Exchange LSE
Par Value £100
Maturity Date 22/10/2030
Coupons per year 2
Next coupon date 22/10/25 e
Coupon 0.375%
Income Yield 0.45%
Gross redemption yield 4.04%

Inside a tax wrapper, the world’s your onion.

One strategy would be to buy several different years, then when the gilt matures you may or may not be able to re-invest at a higher rate but you could spend your hard earned on you or your family.