Frequently Asked Questions About PIBS

PIBS are Permanent Interest Bearing Shares issued by Building Societies and quoted on a recognised Stock Exchange. PIBS generally pay a fixed rate of interest to the holders.

As Building Societies cannot raise money by issuing shares on the stock market, they do so instead by issuing deferred shares that pay interest over an indefinite period. Building societies need to do this as they are required by the Financial Services Authority (FSA) to maintain approved levels of Tier 1 capital, which is made up of PIBS and retained profits.

No, 'ordinary' shares in a listed company confer an equity stake in the company itself, whilst PIBS (Permanent Interest Bearing Shares) are more similar to a bond, which is a promise in writing to repay a debt.

As the name suggests, PIBS (Permanent Interest Bearing Shares) are permanent securities and so have no maturity date. However, in some cases, issuers may allow holders to redeem the PIBS at certain specified dates in the future, subject to FSA approval.

Interest is paid twice yearly, without the deduction of basic rate tax. However, in the event that the society is struggling financially and cannot afford to pay PIBS interest for that period, the terms and conditions of the PIBS state that no obligation is carried forward, so the interest may be missed completely for that period.

PIBS are traded on the Stock Market, and unless there is an active market, it may be difficult to obtain a price. An appropriately qualified and selected professional adviser should be able to determine exact market prices.

No; PIBS (Permanent Interest Bearing Shares) are not covered by the Financial Services Compensation Scheme (FSCS).