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How to invest in gilts direct: You can buy and hold, or try to exploit the tax perks - here's what you need to know
How to invest in gilts direct: You can buy and hold, or try to exploit the tax perks - here's what you need to know

Daily Mail​

time4 days ago

  • Business
  • Daily Mail​

How to invest in gilts direct: You can buy and hold, or try to exploit the tax perks - here's what you need to know

Lending money to the Government by buying its 'gilts' direct is seen as a low-risk and lucrative earner by a growing number of investors. You receive a regular income, known as the coupon, and if you hang on until the maturity date you get all your money back - except in the unlikely event the UK defaults on its debt. DIY investing brokers have made it easy to buy single gilts and stash them in your Isa, while financial advisers increasingly tend to recommend them to higher earners who have already maxed out their Isas for the tax perks. Although you can certainly opt to buy and hold, if you are able to sell at a profit earlier you can make a saving on capital gains tax, which isn't levied on gilts. Many individual investors find it easier to buy a bond fund and let a manager do the hard work - see more on the this below. But if you are keen to buy gilts direct and willing to do your homework, here's what you need to know. What are gilts? Governments around the world issue bonds in order to borrow money to help pay their bills - the UK's bonds are called 'gilts'. Investors, including banks, insurers and pension funds, as well as individuals, buy them in order to earn a return. Governments issue bonds with a range of different maturities - three months, a year, 10 years, 30 years and so on. This is the length of time governments are giving themselves to pay back investors. Short-dated bonds are those that mature fast, and in normal times are deemed less risky as a result. Long-dated bonds are those where investors have to wait a while to see their money again, and are regarded as riskier because there is more time for things to go wrong. This means rates of return are low on gilts that mature quickly, but can vie with current savings rates or beat them on the longer-dated ones. You can get your money back at the end, or sell earlier on the secondary market and, depending on values of gilts then, may get more than you originally paid. Some investors buy gilts direct that will mature serially over time - something known as building a 'gilt ladder'. The value of a bond is both the capital gain that you could make should you sell it and the coupon that you receive. Dan Coatsworth, investment analyst at DIY platform AJ Bell, says: 'Gilts may appeal to income-seekers. 'However, there are still some dangers of which patient portfolio builders should be aware, so they can factor them into their study of whether the coupon on offer is sufficient to justify these risks and that the instrument's return profile fits with their overall investment strategy, target return, time horizon and appetite for risk.' He says investors should bear in mind the risk the issuer defaults, liquidity risk - meaning is a gilt's issue size large enough to make it easy to buy and sell in the secondary market - interest rate changes that can hit bond prices, and inflation risk which can erode your real return. Why is buying gilts direct attractive for higher earners? Gilts can be very tax efficient, especially for those paying higher tax rates looking to invest outside Isas and pensions. While the coupon is subject to tax, just like cash savings interest if you exceed your personal savings allowance, price gains are exempt from capital gains tax. This works with gilts with low coupons, where you make a gain on any uplift from your original purchase price. But Jason Hollands, managing director of wealth manager Evelyn Partners, cautions that individual investors must be ready to do some maths regarding 'yield to maturity' and post-tax yield on gilts to make this work. 'It isn't quite as straightforward as picking the ones with the highest headline yields' he says. 'What really matters is the post tax yield to maturity and that involves calculating the different impact of tax on interest coupons and tax-exempt price gains between now and when the gilt matures. 'If you look at platforms offering execution-only dealing in gilts, the information provided is typically limited to coupon, maturity date and price – so you'd have to work out the yield to maturity yourself, and then the post-tax yield. 'An investor who is unfamiliar with direct investing in bonds might just hone in on the coupon, so it is easy to make a mistake. 'If you're looking for a more tax efficient home and better returns for a sizeable cash pile, it can make sense to speak to a wealth manager which can build a gilt ladder or a cautious cash-equivalent and shorter-dated portfolio.' How do you invest in gilts direct Many of the top DIY investing platforms including Hargreaves Lansdown, Interactive Investor and AJ Bell offer gilts. You can keep a check on their sites for a list of what's currently available, or you may be able to sign up for alerts on upcoming issues. Gilts are often sold at short notice and for limited periods, and if you miss out you would have to buy on the open (also known as secondary) market when the price might already have risen. You can also buy direct from the UK Debt Management Office, which offers a service run by Computershare. You have to be a member of its 'Approved Group', which means you live in the UK and pass its identity and money laundering rules. If you are an existing customer at a broker it's likely your buyer status is already established, so you can purchase gilts online like any other investment. Regarding costs, DMO charges start at 0.7 per cent or a minimum of £12.50 on gilt purchases worth up to £5,000, or check with your own platform. Should you opt for a bond fund instead? You can get exposure to gilts, and other overseas bonds and corporate bonds, by buying bond funds. Here, a manager does the work of deciding which bonds to buy or sell, and spreads the risk as their value rises or falls over time. A professional will be better placed to forecast bond market moves, watch for changes in inflation, and monitor interest rates which heavily influence bonds as investors seek to beat them. Buying a bond fund means stumping up management fees though, and you don't get the option of holding individual bonds to maturity and getting your capital back.

How to DIY with retirement paycheques
How to DIY with retirement paycheques

Globe and Mail

time6 days ago

  • Business
  • Globe and Mail

How to DIY with retirement paycheques

Many do-it-yourself (DIY) investors have managed to amass a nest egg to fund what they hope will be a comfortable retirement. Now comes the hard part: turning what you've saved while working – your accumulation years – into a reliable and tax-efficient income stream that lasts as long as you do. That can be complicated, says Thuy Lam, certified financial planner at Objective Financial Partners in Markham, Ont. 'The challenging part for do-it-yourselfers is how they build that retirement paycheque.' Welcome to the decumulation phase, the post-retirement years when you need to unwind assets to create a paycheque. This is a time when it's harder to recover from mistakes or setbacks, many decisions loom, and smart strategies are critical. While many Canadians are comfortable making investment decisions, Ms. Lam says planning retirement income can be overwhelming. 'People aren't sure how much, when and how to draw from their investments,' she says. Doing this prudently also involves decisions about when to start government benefits and, for some people, a workplace pension. If you're going it alone, Ms. Lam suggests starting by carefully tracking expenditures before retiring. This provides a baseline of spending habits that you can then project into retirement, adjusting for decreases in costs such as commuting to work, and increases for more frequent vacations. 'Determine what assets are available to you, and potentially when,' says Mark Seed, a semi-retired DIY investor in Ottawa, who blogs about his journey at My Own Advisor. He notes that a major consideration is deciding when to draw on Canada Pension Plan (CPP) benefits and Old Age Security (OAS). Many retirees increasingly opt to defer them in order to receive larger benefits from both, ensuring more guaranteed income later in life. Retirees can bridge any gaps by relying more on their Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) to cover fixed costs and predictable variable expenses. Registered accounts are fully taxable, which can lead to tax problems down the road in retirement when mandatory RRIF withdrawals increase. Strategic withdrawals from RRSPs and RRIFs earlier can make sense. 'This helps reduce your tax-deferred liability,' Mr. Seed says. Ms. Lam suggests building a retirement income plan based on three buckets. The base income bucket comprises guaranteed income such as CPP, defined benefit workplace pensions, and OAS. Registered accounts (like RRSPs, group plans and defined contribution plans) can be layered on top tax-efficiently as a second bucket for remaining fixed and even variable expenses. The third bucket is for non-registered investments that provide tax-efficient dividends and capital gains income, or tax-free cash in the case of the Tax-Free Savings Account (TFSA). These can be used for large expenses, whether unexpected like a new roof, or planned like helping children purchase a first home. Solid cash-flow planning can help tremendously, Ms. Lam says. 'This involves matching income buckets to categorized spending, and reviewing regularly to ensure you can spend sustainably throughout retirement.' Do investment strategies need to change in retirement? According to Ms. Lam, 'the shift isn't as different as you might think.' She recommends a total return strategy, building income from interest, dividends and capital gains. After all, retirement may last decades. 'You don't have to totally gear the portfolio to generate income at the expense of long-term growth.' Annuities are another option for building retirement paycheque, especially for those without workplace pensions. These insurance products involve giving up a chunk of capital for a guaranteed income stream for a set period, or for life. 'This ensures a long-term floor in spending, while allowing retirees to confidently invest more aggressively with the rest of their portfolio,' says Kyle Prevost, a Manitoba financial educator who has created online courses on a worry-free retirement. To crunch the numbers, there are all sorts of free resources like the Government of Canada's retirement income calculator, and The Globe and Mail's optimal drawdown tool. It's possible to dig far deeper with The MoneyReady App, a subscription-based retirement planning tool for DIYers created by Elisabeth Tillier of Toronto, a retired computational biologist. She first developed the tool for her own retirement. The tool lets users test different withdrawal strategies. 'It's like a cash flow time machine,' says Ms. Tillier.

How we test and review investment platforms
How we test and review investment platforms

Daily Mail​

time15-07-2025

  • Business
  • Daily Mail​

How we test and review investment platforms

Products featured in this article are independently selected by This is Money's specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. At This is Money, we're committed to improving our readers' financial lives. Part of that involves scouring the personal finance landscape for the best financial products, deals, and services. Investing is a cornerstone of building your wealth over the long-term and for many savers investment platforms are the key to that, allowing them to buy and hold funds, shares, bonds and ETFs. DIY investment platforms have surged in popularity in recent years. According to data from Boring Money, the number of non-advised customer accounts has more than doubled since the start of 2020, going from around 5.95million to more than 12million. It's important each of these account holders gets the most from their investing platform – and if they're not, our aim is to provide all the information they need to move to a more suitable provider. We're also dedicated to making sure new customers choose the right platform for their needs. This is why we regularly review the DIY investing market, testing platforms and measuring their effectiveness. We analyse each investment platform with different types of investor in mind, from the cost-conscious to those who want the best customer service. What do we mean by DIY investing platform? A DIY investing platform is a service that lets you choose your own investments and hold them in either a general investment account or a tax-efficient wrapper, such as a stocks and shares Isa or self-invested personal pension (Sipp). As part of our review, we consider what investment accounts the platform offers. For fairer and simpler comparisons, we make a distinction between traditional investment platforms and newer, often app-focused trading platforms. We categorise these providers as traditional investment platforms for comparison: AJ Bell Bestinvest Charles Stanley Direct Fidelity Hargreaves Lansdown Interactive Investor We categorise these providers as newer, more app-focused investment platforms for comparison: eToro Freetrade Prosper Trading 212 Our methodology when reviewing investment platforms The main criteria we consider are: fees investment choice how intuitive the platform is to use customer service How we review fees High fees eat into investment returns, so we're keen to make sure our readers get value for money. However, the cheapest platform won't always be the right one for you. It really depends on what you're looking for from an investment platform, and we take this into account in our reviews. We primarily compare account fees to see which investment platforms offer the best value. We work out annual account fees for a range of portfolio sizes, which helps you discover the ideal option for the value of your investments and your overall financial goals. Finally, we review other fees through the lens of different investors – for example, someone who wants to invest in funds primarily should check whether the platform offers free fund dealing. How we review investment choice We consider the number of investments that each platform says it offers, plus how you can buy each type of investment. For example, platforms don't always allow you to buy bonds and gilts directly and don't always allow fractional investing in stocks and shares. The traditional DIY investing platforms generally offer a similar range of investments, so we highlight any major differences between platforms in our review. It's different with the newer investment platforms, which have some variation in the types of investment on offer. When testing, we scrutinise the investment choice on offer and explain what you can and can't invest in as part of our review. How easy is to use - how we test intuitiveness Our reviewers test each platform on both desktop and mobile where possible. Keep in mind not all investment platforms will offer both options, and we'll state whether the platform is primarily app or browser-based in our review. We test how straightforward it is to perform key tasks when investing including: searching for investments buying and selling investments setting up regular investing adding cash to an account accessing research and other information that helps you invest Our reviewers give their thoughts on these functions. But what's intuitive for one person won't always be intuitive for another, so you should consider your needs carefully before deciding which platform to choose. For example, if you think you'll need more support when using the platform, you could choose a service that does well for customer service. How we test customer service We review the availability of customer support, for example: what options you have for contacting customer service – usually phone, live chat and email how many days of the week you can contact customer service how straightforward it is to contact the team directly from your account We also test getting in touch with customer support to see how well they respond to a particular problem. Our reviewers give their account of how this interaction went, which helps you decide whether you'd be comfortable with the level of service provided. Our final assessment Our final assessment of each investment platform explains who we think it's good for, for example a cost-conscious investor, or someone who doesn't mind paying a bit more to access the best customer support and investment research. How our reviews inform our platform round-ups Our testing and overall impression of each investment platform help us compile our regularly updated roundups, which allow you compare options and decide on the best one for you: Who are our experts? This is Money has been running since 1999 and has built a reputation as a trusted financial website that helps its readers make the best decisions for their money. Our writers and reporters have years and in some cases decades of experience in covering financial products, including investment accounts, as well as investments themselves. They use the platforms in their personal lives and regularly speak to industry experts, deepening their knowledge. Importantly, their aim is to make money engaging, giving you clarity over what is often a complicated topic. Meet our team

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