Gilt Ladder
One gilt maturing in each year you need cash. Each pays back its slice of principal, and the coupons on the longer rungs top up the earlier years.
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The plan
Each rung is sized so that, once the coupons from every later rung are counted, that year lands exactly on your target after income tax. The rungs are held to maturity. Price rises and falls in between don't matter, because you never sell. Inflation: the amount you enter is in today’s money. Each year’s target is raised by the rate you choose, to the middle of that year, so the cash buys what it does now. Gilts pay fixed sums, so the extra has to be bought up front, which is why the ladder costs more. The rate is your assumption, not a forecast; the Bank of England aims for 2%. Index-linked gilts are the other way to do this and are not modelled here. Building up: you buy once a year on this date until the ladder is complete, then the first cash arrives. “Best” tries all four buying orders under your assumptions and uses whichever gives the highest ladder yield. Usually that is the highest after-tax yields first. Coupons that land during the build pay for the next purchase, and the rest comes from your pocket. Later purchases are priced by rolling each gilt forward at its current yield, shifted by whatever you pick above, so a gilt costs more each year as it nears £100. Real prices will differ. Where no gilt matures in a year, the nearest earlier gilt is bought bigger to cover it, and that cash waits unspent until needed. Not modelled: the Personal Savings Allowance, the 0% starting rate for savings, Scottish rates, dealing costs, and what happens to cash you receive before it's needed. ISAs and pensions pay no tax, so choose the 0% setting for those. This is arithmetic, not advice.
What it costs
The same ladder, built three ways. Where two gilts mature in the same year, the rung takes the lowest coupon, the highest coupon, or whichever gives the best yield after your tax.
Building it up
What goes into each rung, year by year
How the four buying orders compare
Cash by year
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The rungs
What to buy, rung by rung.