Once you’re comfortable reading gilt tables, the next step is to turn the data into a practical structure: a gilt ladder.
A ladder is just a posh name for:
“Spreading your money across several maturity dates so everything doesn’t mature at once.”
In this post we’ll cover:
- What a gilt ladder is (in real human terms)
- How to choose your maturity buckets
- A simple example ladder using low-coupon gilts
- How to maintain and adjust it over time
1. What is a gilt ladder?
Imagine you have £100,000 you want to keep safe and low-risk, but you’d like:
- A better return than leaving everything in instant-access cash
- Some protection if rates fall in future
- The comfort of regular maturities coming back to you
A gilt ladder spreads that £100,000 across bonds maturing in different years, for example:
- 2026
- 2028
- 2030
- 2032
Each year or two, a rung matures and the cash comes back. You can:
- Spend it
- Or reinvest into a new long rung at the time
2. Choose your “rungs”: matching time horizon and risk
Start with two questions:
- When might I need the money?
- Next 1–2 years? Keep that part very short (cash, 2025–2027 gilts).
- Longer-term “safe” pot? You can go out to 2028–2035 or beyond.
- How much price movement can I tolerate?
- Shorter gilts (2026–2028) move less when yields change.
- Longer gilts (2035+) move more, but offer higher yields.
For many cautious DIY investors, a short–medium ladder is a good starting point: say 2026 to 2032.
3. A worked example: 7-year ladder (illustrative only)
Let’s say you have £70,000 to put into gilts.
You decide on maturities roughly every 2 years from 2026 to 2038:
- 2026 – cash buffer + first rung
- 2028
- 2030
- 2032
- 2034
- 2036
- 2038
You could allocate, for example:
- £10,000 in a low-coupon 2026 gilt
- £10,000 in a low-coupon 2028 gilt
- £10,000 in a low-coupon 2030 gilt
- £10,000 in a low-coupon 2032 gilt
- £10,000 in a low-coupon 2034 gilt
- £10,000 in a low-coupon 2036 gilt
- £10,000 in a low-coupon 2038 gilt
Within each “year”, pick gilts that:
- Have low coupons
- Trade below £100
- Offer decent YTM compared with cash
Result:
- The average yield on your ladder is higher than short-term cash
- You avoid betting everything on a single year’s yield
- You get predictable maturity dates to line up with future plans
4. How to maintain your ladder
Each time a rung matures, you have three choices:
- Take the cash
- If you need the money in real life – fine. That rung has done its job.
- Roll into a new far rung
- If a 2026 gilt matures, you might buy a 2038–2040 gilt to keep the ladder length similar.
- Shorten the ladder as you age / approach spending
- As you get closer to retirement or a big spending goal, you can stop rolling into the far end and let the ladder gradually shrink towards the present.
You can also rebalance occasionally if:
- Yields change dramatically
- Your attitude to risk changes
- Tax rules or your other holdings move around
5. Why ladders work psychologically
There’s a big behavioural benefit here.
Instead of constantly guessing the right maturity or trying to time interest rates, you:
- Set up a structure once
- Let individual rungs come due on a schedule
- Make small, incremental decisions as each one matures
It turns “rate-guessing” into “maintenance”, which is much easier to live with.
In the next post we’ll look at how tax-sensitive investors (e.g. higher-rate taxpayers holding gilts outside an ISA) might tweak the ladder for tax efficiency.
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