Permanent Interest Bearing Shares

These are issued by building societies. They always said, the society would have to be in trouble before they failed to pay the interest, nearly as safe as houses, high income, blah blah.

A load were issued in 1990 at around 13% interest, as interest rates generally fell the price of these went through the roof. If you had 100 grand in in 1990 you were coining in £13 a year interest and at any point (or so you thought) you could flog them for £180-190k.

People by and large didn't sell. Recently the PIBS holders for the West Bromwich were effectively shafted.

Now, you would think the Nationwide Building Society is as safe as houses. Fact is, the PIBS are trading at two thirds face value. Buy now and you get 11% income. But I'll bet if you tried to insure yourself against them going pear-shaped it would cost you 8k per 100k covered - you'd be as well in cash.

The PIBS story is a classic case of "It's not what you don't know that gets you into trouble, it's what you're absolutely certain about that turns out not to be so". I can remember looking at Bank of Scotland subordinated debt (effectively PIBS) and seriously considering it. Thank f'ck I didn't.

Investors' Chronicle on the sad tale of PIBS.

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