The Security of PIBS

PIBS (Permanent Interest Bearing Shares) provide risk-bearing capital to the issuing society. The subordinated nature of PIBS means that they rank behind all other depositors, creditors and those members holding share accounts, in terms of interest repayment. So if the building society fell into financial trouble, the twice yearly interest payments on PIBS may be missed for that period (there is no obligation to carry missed interest payments forward. Furthermore, if the society became insolvent, any members that held PIBS would be last in the queue to receive their money back - and payment would only be received if there was sufficient left after paying all the other investors. Unlike other building society investors, PIBS holders are not covered by the Financial Services Compensation Scheme.

As PIBS (Permanent Interest Bearing Shares) cannot be sold back to the society or withdrawn like savings, they must be bought and sold on the stock exchange, so their price will vary, depending on when they are sold. Like other fixed interest securities, if interest rates generally go down, their value goes up; conversely, if rates generally rise, their value falls. In addition, investors will only be able to sell their PIBS if there are buyers in the market at the same time, which means they may not be able to sell their PIBS when they want to. Although PIBS are generally irredeemable to investors, some issues can be called at the building society's option, generally with a penalty interest charge.