The different variations of government retail bonds
There are two main forms of government retail bonds
Fixed rate government retail bonds; and
Inflation-linked government retail bonds.
To decide on which of these options is best for you, you need to consider what’s going to happen to inflation in the future.
If you think that inflation could rise a lot over the term of the bond you pick, then inflation-linked government bonds are likely to be the best choice for you.
If you think that general forecasts are more likely, then opt for a fixed rate government retail bonds.
The different maturities of government retail bonds
Both types of government retail bonds have different maturities.
For fixed rate government retail bonds, you can select from two, three or five years. For inflation-linked bonds, you can select from three, five and ten years.
The longer the maturity of the bond, the higher the interest rate. This compensates you for locking your money away for a longer period of time.
How to decide which government retail bond is right for you
If you want to buy government retail bonds, the first thing you need to ensure is you’re using money you don’t need until the bond matures.
If you decide you want to get your money out early, you’ll pay a penalty. If this is within the first year, you can only do this under exceptional circumstances that you will have to provide proof of.
With this in mind, you can decide which term is best for you. Your outlook on inflation can help you to decide which type of bond you want to buy.
So there you have it. How to pick the right government retail bond for you.
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