In the budget, Gordon Brown unveiled the planned launch of a long-dated gilt in May, which will allow the government to borrow over an extended period, and take advantage of low interest rates.
Although Mr Brown did not say how much the Treasury expects to raise by issuing these 50-year bonds, he believes that the UK economy is stable enough to allow government to consider selling a long term gilt, and that it would benefit taxpayers, government and investors.
Our view
A Gilt is technically you lending money to the Government i.e. you own a 'share' of the UK. It is one of the most secure investments you can purchase as it is backed by the biggest company in the UK i.e. The Government. Being able to buy secure, fixed interest delivering investments, over the longer term in our opinion will give a welcome boost to the ailing 'with profits' investment market and the pension annuity market. Perhaps we will see annuities slightly improve.
However, if the Government is confident enough to offer Gilts now at a competitive fixed rates, it is also our opinion that their economic strategists may see a period of higher interest rates on the horizon. Gilts tend to set the benchmark for other interest rates such as deposit.
Do not borrow too much personally!