Gilt-edged Securities - Index-linked Gilts

Index-linked Gilts

These account for around a quarter of UK government debt within the gilt market. The UK was one of the first developed economies to issue index-linked bonds in 1981. Initially only tax-exempt pension funds were allowed to hold these bonds. The UK has issued around 20 index-linked bonds since then. Like conventional gilts, index-linked gilts pay coupons which are initially set in line with market interest rates. However, their semi-annual coupons and principal payment are adjusted in line with movements in the General Index of Retail Prices (RPI).

In September 2005, the UK Government issued the longest ever index-linked government bond, 1¼% Index-linked Treasury Gilt 2055, maturing on 22 November 2055. A further ultra-long index-linked bond, maturing in 2062, was issued in October 2011.