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Impact Investing

IPE special report May 2018

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UK set to offer 50-year bonds

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Pension funds will see an immediate benefit from the introduction of 50-year bonds by the UK government from this month.
The ultra-long bonds are expected to help pension schemes better match their liabilities and help set the price of the synthetic products being expensively sold by investment banks.
Gordon Brown, the UK Chancellor, in his budget speech to parliament last month said: “We will now issue long-term bonds with maturities, for the first time in a generation, of up to 50 years.”
The Debt Management Office, which issues the gilts, said it planned to auction off an as-yet-undisclosed amount of the 50-year bonds as part of the £53.5bn (e76.8bn) of debt being raised in the next financial year starting on 1 April.
The ultra-long bonds will form part of the £18.5bn in long-dated and £11bn index-linked gilt issuance. The UK’s move follows 50-year bond issuance by the French government and Italian phone giant Telecom Italia.
The treasury has committed itself to introducing legislation for a tax-exempt real estate investment trust (REIT) in 2006.
The treasury said it was “committed in principle” to reforming the taxation of real estate investment. The discussion paper outlines the Treasury’s preferences on a number of points and asks for further comment from the real estate industry. REITs, which were pioneered in the US, offer investors a liquid securitised exposure to real estate.
Also in the budget, the chancellor said the treasury would spend £4m promoting a cheap pension from the Stakeholder range of simple, low-cost savings and investment products that start in April.

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