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How to buy PIBS?

Investment | Specialist Helpful? 6

Asked by dhrudge, submitted 09 July 2012.

Open Quote I read the piece in this week's Sunday Times 'Money' section and am interested in buying some PIBS in the Coventry Building Society on which you made some comments - how do I go about buying PIBS in the Coventry? Are there limits to the amount that can be invested? What charges are involved when buying/selling?

Thanks!
End Quote

Answered by Justin on 10 July 2012

Permanent Interest Bearing Shares (PIBS) are basically corporate bonds issued by building societies. The main issue when buying and selling is that they're not always that widely traded, which can lead to quite high differences between the buying and selling price (i.e. bid offer spread) at times.

If you already use a stockbroker (online or otherwise) then check whether they offer PIB dealing, chances are they will. I just checked low cost online broker x-o.co.uk and they appear to offer the Coventry BS 6.092% PIB due to be called (i.e. redeemed if the society chooses to do so) in June 2016, with a bid price of 86.5p and offer price of 89.5p (a 3.47% spread, not too bad). The minimum deal size is £1,000 which tends to be norm for PIBS. The only charge should be the stockbroker dealing fee (£5.95 through x-o) as PIBS are exempt from stamp duty.

Although potential returns look enticing - the yield to call (which includes both income and profit from buying the PIBS below their 100p redemption price assuming they are subsequently redeemed) for the Coventry PIBS is (at the time of writing) 9.29% - please ensure you're aware of the potential risks before taking the plunge. The reason yields are high is that the market perceives these investments to be fairly risky, so you need to invest with your eyes open .I think they look a reasonable bet at present, but there are no guarantees!

To read more about PIBS take a look at my reply to this previous question.

You can also view an up to date list of PIBS issues, prices and yields on the Fixed Income Investment Information website.


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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