PIBS stands for Permanent Interest Bearing Shares (PIBS). They are building society shares listed and traded on the London Stock Exchange. Generally they have a fixed coupon (rate of interest) and are irredeemable or callable at the issuer’s option. Often the coupon is reset to a floating rate if the call is not exercised. Until the recent banking crisis it was an unwritten convention that issuers would redeem PIBS on the first call date. However, it is far from certain that this convention will continue.

On a winding up, PIBS holders rank behind all other lenders, depositors and members holding share accounts, and any repayment would be limited to par, or 100p per share. Unpaid interest is non-cumulative such that if the society fails to pay interest one year, it will not be required to pay any arrears in future.

Interest is paid gross twice a year and an investor should then declare it on his tax return.

PIBS are dealt clean of interest which this means that the accrued interest is settled separately, as it is with bonds. No stamp duty is payable on UK issues.

Where a former building society has been taken over or converted to a plc, the PIBS have been converted to perpetual subordinated bonds, whose characteristics are similar to PIBS although, in some cases, any unpaid interest on subordinated bonds is cumulative, and arrears can be made up in future years.

PIBS and subordinated bonds can be dealt only in round amounts, varying from 1,000 shares up to 100,000. The quoted spreads on PIBS are often large and it is usually beneficial to deal through a specialist fixed income broker who will usually be able to obtain prices well within these spreads. For further details read the Buying Fixed Income Securities section of this site.

For current quoted prices and key details of listed PIBS the PIBS Prices & Details (Permanent Interest Bearing Shares) section of this site has comprehensive coverage.