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JayJay
Newbie
Joined: 25 Oct 2006
Posts: 18
Cash Points ££ 333.60
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 Posted: Sat Oct 28, 2006 3:22 am Post subject: Whats a PIBS , Permanent Interest Bearing Share |
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Hi
Having joined an online stock broker, Ive come across PIBS, I know what it stands for, but exactly what is a PIBS ?
Thanks |
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Wade
Saving Enthusiast
Joined: 17 Feb 2005
Posts: 185
Cash Points ££ 2569.94
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| Posted: Sat Oct 28, 2006 3:25 am Post subject: |
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Permanent interest bearing shares (PIBS)
Description/suitable forPermanent interest bearing shares (PIBS) were issued by building societies and ex-building societies. They work in a similar way to gilts and corporate bonds. PIBS are quoted in amounts that have a nominal value of £100. The price you pay depends on current stock market values - influenced by interest rates and the creditworthiness of the issuer. PIBS are primarily used for income and have different levels of risk.
Return and charges
The income is fixed at the time you buy and depends on the price you pay. If you buy a PIBS offering 5 per cent interest at a price of £100, the interest rate you get is 5 per cent. If the price is more than £100, the interest rate you get is less than 5 per cent. If you pay less than £100, the interest rate is higher than 5 per cent.
Unlike most gilts and corporate bonds, PIBS generally have no redemption date at where the issuer promises to pay back the initial capital. PIBS are bought and sold through stockbrokers. When you buy and sell you incur dealing charges.
Minimum investment recommended
No set minimum, but stockbrokers' dealing costs make investments of say, under £1,000-£1,500 uneconomic
How long is investment for?
No set period - depends on your investment goals.
Can you get your money back quickly?
Yes, but stockbroker charges and interest rate movements may mean you get back less than you paid in.
Can the value of your capital go down?
Yes - if the level of interest rates in the economy rises then the price of PIBS will fall. If you sell at that point you'll probably get less for the PIBS than you paid. Holders of PIBS are also last in line for payment if the building society that issued them goes bust.
Tax points
Interest from PIBS is taxable. However, there is no capital gains tax to pay. |
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housebuyer
Money Saver
Joined: 02 May 2005
Posts: 81
Cash Points ££ 2815.22
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| Posted: Mon Oct 30, 2006 8:12 am Post subject: |
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I was not aware of PIBS, thanks ! 
Very interesting so I can get more than I can on bonds ?
Looking at some, there on at 8% ! |
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Sugarbabe
Beginning Saver
Joined: 19 Jun 2006
Posts: 49
Cash Points ££ 1027.04
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| Posted: Fri Nov 03, 2006 3:47 pm Post subject: |
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| Since they are permanent, then that must mean that they are very interest rate sensitive, so if rates are rising they must be falling in price ? |
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