Permanent interest-bearing shares are shares in building societies (as opposed to the societies that have become banks) and offer a high fixed rate of interest - usually higher than is available on other fixed-interest products such as corporate bonds. Interest is payable at six-monthly intervals.
Societies issue Pibs to unlock some of the value in their income from mortgage payments. By selling a stake in that income stream, the society gets access to capital it may need for expansion. But Pibs pay high interest because they carry risk. They are called "permanent" because they cannot be redeemed - meaning the society cannot buy them back.
Pibs have only existed since 1991 and no one knows how popular they will be in the long term. If they go out of fashion, it may prove harder to recoup your investment by selling up. Only stockbrokers are allowed to give advice on Pibs and buy and sell on your behalf.
Two other kinds of unusual investment also offer better returns than ordinary savings accounts: money market accounts and cash unit trusts.
Money market accounts can offer a better interest rate than ordinary cash deposits without the risk of investing in shares. Building societies and banks rarely pay interest at anything like the rate offered by the money markets. But some private banks offer individual investors the chance to get a better interest rate - if they are prepared to put in enough money. For a minimum investment of pounds 5,000, interest will typically be paid at no more than 0.5 per cent below base rates. The interest is paid quarterly and investors can often get access to their funds within seven days.
Providers of cash unit trusts do not deal in shares. They simply pool together millions of pounds in deposits. The size of that pooled investment is then used as a bargaining tool to get better rates when a deposit is made. Managers can also get better rates by anticipating movements in interest rates. If they look set to fall, they can buy long-term deposits paying better rates of interest.
Investors buy units in the trust; typically they must spend at least pounds 50 a month or a lump sum of pounds 5,000. Income is taxed at 20 per cent.
Contacts: (for Pibs) the Association of Private Client Investment Managers and Stock- brokers, 112 Middlesex Street, London E1 7HY; (for money market accounts) Close Brothers, 0171-426 4000; (for cash unit trusts) the Association of Unit Trusts and Investment Funds, 0171-831 0898.Reuse content