Index-linked gilts are a type of UK government bond that provides investors with protection against inflation. They are designed to maintain their real value over time, making them an attractive investment option for those who are concerned about the erosive effects of inflation. Index-linked gilts are linked to a measure of inflation, typically the UK Retail Prices Index (RPI). This means that the value of the bond will increase in line with inflation, thus preserving its purchasing power.
There are several benefits to investing in index-linked gilts. First, they provide a degree of inflation protection, which can be valuable in periods of high inflation. Second, they offer a relatively stable return, as the value of the bond is linked to inflation rather than to interest rates. Third, index-linked gilts are considered to be a low-risk investment, as they are backed by the UK government.