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What is a Gilt?

Gilts are Bonds that are issued by the British Government to raise money.  They are generally considered to be a low risk investment.  The term originated in Britain and referred to debt securities that had a gilt (or guilded) edge.

Conventional gilts are the simplest form of government bond. They guarantee to pay the holder a fixed cash payments at regular intervals (e.g. every six months) until the bond matures, at which point the holder receives the final payment as well as getting the original investment back.

There are other types of gilt,  such as index-linked gilts. Here the payments are related to movements in the Retail Prices Index (RPI) – in other words, it is linked to inflation.

The main purchasers of gilts are pension funds as they need to be able to meet payments when people retire. They are also used by individuals who are looking for a steady income or as part of a balanced investment portfolio.

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