PERMANENT interest bearing shares or PIBS are special shares issued by building societies that pay a fixed rate of interest. They cannot be sold back to the society but can be bought and sold on the stock exchange, which means the price varies. A few years back, Permanent Interest Bearing Shares or Pibs were considered to be as good as gold, and were considered to be a safe home for income seekers. The problem with PIBS is that in the event of a building society being wound up, PIBS owners will find themselves some way down the queue and may not get back all of their capital as they are not protected by the FSCS. In the past, this was an acceptable risk where the possibility of a UK building society being wound up would have been almost zero, but as we have seen this is all changed now.
Some building societies, such as Bradford & Bingley, have decided not to pay the interest payments, which is catastrophic news for those who rely on this to supplement their income, such as pensioners. Trying to sell them on can prove difficult, as PIBS are an illiquid investment and now, with the danger of suspended interest payments looming, no one wants to buy them.
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