Interest on PIBS

PIBS (Permanent Interest Bearing Shares) are a type of deferred share that pays interest over an indefinite period. Although they are generally fixed-interest, some are occasionally issued as floating rate PIBS, where the interest rate changes in line with other rates of interest. With fixed-rate PIBS, the interest is normally based on the coupon rate at the time of purchase. This makes PIBS issued in times of high interest particularly attractive in periods of low interest rates.

Gross interest payments on PIBS are generally made twice a year; however, payments are only made after interest payments have been made on ordinary savings accounts. If the society fails to make an interest payment on a PIBS, the terms and conditions of the PIBS state that no obligation is carried forward, so the interest may be missed for that period. However, an additional PIBS can be issued in lieu of a cash payment.