Spread your gilts' maturities across the years so one rung matures each year, and reinvest every repayment to keep the income rolling — a simple, honest look at how ladders work and what they can and cannot do.
What is a bond ladder?
A bond ladder is a set of bonds with maturities spread over consecutive years. Instead of one bond that all matures at a single date, you own several gilts maturing one per year. When each gilt matures you receive the £100 nominal back and can reinvest it in a new gilt at the far end of the ladder, so the ladder keeps roughly the same shape year after year.
Why ladder gilts?
- Staggered redemptions give you a rolling source of capital you can reinvest on a schedule you choose.
- Reinvesting one rung a year smooths interest-rate risk — you never lock everything in at a single moment.
- Each rung's maturity is known in advance, which makes planning future spending or income more concrete.
Designing a ladder
Pick a length (five or ten years is common) and the annual income you want. A simple design buys a gilt maturing in each of the next N years, sized so each year's coupons — and the maturing rung's principal when it arrives — together produce your target. The shorter the ladder, the more of your money turns over quickly; the longer it is, the more time the remaining rungs spend exposed to whatever rates do next.
Choosing gilts for each rung
Start from the bond ladder page, which lists every gilt in the latest report with its coupon income per £100 nominal, sorted by maturity. For each year of the ladder you need a gilt whose maturity lands in that year. To size a rung, divide your target annual income by the income that each £100 of the chosen gilt produces — that gives the nominal amount to buy. Conventional gilts give certainty about the cash amounts; index-linked gilts trade some of that certainty for inflation protection.
Running the ladder
When a rung matures, reinvest the principal in a new gilt at the far end of the ladder to keep the spacing intact, and rebalance occasionally if a coupon no longer matches your needs. Keep your trades in your portfolio so the figures stay accurate. A ladder does not remove interest-rate risk or market risk — it spreads them over time — and this guide is general background, not advice for your personal circumstances.