Capital stock or bond?

Check out "zero dividend preference shares", though I think they're not generally marketed to individuals.

There are probably some gilts which pay nearly no income; if they're dated, they're guaranteed to be redeemed at par on their redemption date, so you can eliminate risk completely, unless the state collapses.

"Ronald Raygun" wrote

How much do the *un*dated "gilts which pay nearly no income", cost? ;-)

I don't know. The OP was asking about guarantees, and with undated ones, there aren't any because it's unpredictable when, if ever, they will be redeemed. You'd have to rely on market demand to get a decent price for them when you wanted to cash them in. I would have thought it likely that hardly any of them would pay "nearly no income", because (absent inside information about imminent redemption) the only reason someone would have for buying them is for the income they pay, not for any prospect of unquantifiable gain.

Would you not agree?

Very little. I can't immediately see any dated (UK) gilts paying less than 4%.

This

is 2.5% undated. You could try something like which I _think_ matures in 2010 and is zero coupon.

Tim.

Yes. I agree. They ought to be priced such that their return approximately matches the long term yield on long dated gilts.

I know someone who did rather well out of war bonds, buying them when interest rates were around 15%.

So knowledge of imminent redemption isn't the only reason for buying them.

But they certainly aren't the safe investment that the OP wanted - although they can be a safe way of getting a (non indexed linked) guaranteed return on capital because they are unlikely to ever be redeemed.

Tim.

Stripped UK treasuries. Although I've no idea how easy they are to trade or how safe they really are.

Depending on how much you have to invest, you can buy them for (quarterly?) redemption from now until (almost) forever.

So you can buy enough now to use up your CGT allowance this year (I think - not 100% certain that there will be any redeeming between now and April 5th) and enough redeeming in the next tax year and then keep rolling it forwards, adding enough in to future years from current redemptions to take advantage of any increase in CGT limits that you couldn't account for when you initially invested.

Tim.

According to

"There are two series of strippable gilts; the first paying coupons on

7 June/ 7 December, became strippable in December 1997. The second series, paying coupons on 7 March/ 7 September, followed in April 2002. "

Robert

wrote

Exactly! "Nearly no income" => "Low price".

Or in other words, the income as a proportion of price paid is never really "low"; you only get "nearly no income", if you pay "nearly no price"...

Which everyone should expect anyway.... [As this is so obvious, I wondered why RR had said his comment at the top.]

Thanks. And now I've found:

So there's a guaranteed market and they have the same credit risk as ordinary gilts.

Tim.

From that same document:

Retail demand for strips has been hampered by the necessary tax treatment, which stipulates that the securities are taxed each year on their capital gain or loss, even though no income payment has been made.

So they don't work the way I assumed wrt CGT.

Tim.

Was it not obvious in my original comment that I meant that gilts which pay nearly no income were likely only to be found among the dated ones?

"Ronald Raygun" wrote

No! - You can buy just a small number of undated gilts, just as easily as you can buy just a small number of dated ones. ["Nearly no gilts" gives "nearly no income".]

But if you mean "nearly no income" as a *proportion* of cost, then there aren't *any* undated gilts like that, are there? [Excluding strips, of course, which give zero income.]

Well it was a good idea. But on further investigating it appears that gains are taxed as if they were income and that you dispose of them and immediately reacquire them on 5th April so you're taxed every year and you therefore can't even use long dated securities to move your income tax liability post retirement (where you might be paying a lower rate)

Tim.

An undated strip would be an "interesting" idea. How many would you like? ;-)

Tim.

Of course that's what I meant! The OP wants a decent return, but because of his tax status he wants to achieve as little as possible of that return as income, as much as possible of it as gain.

That's exactly the point I tried to make! "Gilts like that" would be of the dated, not undated, variety.

wrote

;-)

Change to: "... a strip from an undated...".

"Ronald Raygun" wrote

... ...

"Ronald Raygun" wrote

"Ronald Raygun" wrote

OK, good, fine. It was just that your comment of "... if they're dated..." suggests that *some* are undated!

I see what you mean. It wasn't as clear as it might have been that "they" referred to "gilts", not to "gilts which pay nearly no income". Sorry.

Why has nobody mentioned Index-Linked Gilts, which only pay about 1.5% interest, but the capital and the income is linked to the RPI?

Seems an obvious solution to me.