Should I reinvest a maturing gilt into a new gilt or a money market fund?

With interest rates predicted to climb, when my 2026 gilt matures in July, should I buy a 2029-maturing gilt within my tax-free wrapper, or invest the proceeds in a money market fund?

You're right that short-term rates could tick up. The Middle East conflict has pushed energy prices higher, and some forecasters think the Bank of England base rate could climb to 4.5% if energy costs stay elevated through 2026 and into 2027. So your instinct isn't wrong for the near term.

But zoom out to 2029 and the picture shifts. The OBR projects the base rate declining to around 3.5% by 2029, and the BoE's own August 2025 guidance pointed to gradual reductions through 2027 and 2028. In other words, today's elevated rates may not last to maturity.

And that's exactly the point. Whether you pick the 2029 giltA gilt is a fixed income bond issued by the UK government. They are so named because, historically, the paper certificates used to issue these bonds had a gilt (gilded) edge. The government issues gilts in order to fund public spending. or an MMFA type of fund which invests in large volumes of highly liquid, short-term assets - such as cash or high-quality bonds like gilts or Treasuries near maturity - to generate a quick and generally reliable return., you're making a concentrated bet on where rates land at a specific moment in time. If the economic backdrop shifts, you're locked in.

A diversified The process of spreading your investment portfolio across different asset classes, such as partially in shares and partially in bonds, in order to reduce risk.fund holding gilts, bonds, and equitiesAnother word for shares or stocks. of varying maturities spreads that timing risk across dozens of instruments and dates. No single maturity event determines your outcome. For most investors, that's a more resilient approach than trying to call the rate cycle correctly twice in three years.