Newcastle Building Society PIBS?

threechoirs

Hello all,

I'm trying to sort out my elderly mother's financial affairs - sadly she has dementia. She has '6000 shares in NBS PIBS -  I don't really understand what these are or what they are worth!

This is the first time I've posted so I can't paste a link, but Hargreaves lists these as being sold @ £167 per share with a 'denomination size' of £1000, and an initial investment of £1000.

  I think the share price pertains to units of 100 or 1000 and not per single share obviously (I think we would know if she was a millionaire!  ) - but which is it?!

I know she's had this for a long time but if it's in units of a thousand, it would mean her whole investment is only worth £1,002 - which doesn't seem to quite add up!

Any ideas? Thanks so much. 

Keep_pedalling

I am also not sure what the price on HL referees too either, but I know they can’t be redeemed through the issuer. They do however pay a decent level of interest. More info on the various issues on the following links.

https://www.newcastle.co.uk/investor-relations/terms-of-access/permanent-interest-bearing-shares

Hoenir

£167 per £100 of nominal stock sounds high. Now that interest rates have risen. Which issue is the PIB? 

The shares may well be worth holding onto just for the income they generate. If interest rates fall in the future. Then the price will increase again. 

JANETSAVING

PIBS are Permanent Interest Bearing Shares. They were very popular in the 1970’s -1980ees. Lots were issued by Building Societies and sold to their retail investors / customers.The banking crisis of 2008 signalled the death knell for these bonds. From 2026 (I think) they can no longer used as Tier 1 Capital. Which basically means that the Banks and Building Societies would prefer to get rid of them. There maybe some shenanigans, but the most acceptable route for them to be redeemed is by the Issuer offering to buy back the shares, typically at a modest premium to the prevailing market price.
I’ve no idea if Newcastle Building Society will redeem their PIB.
This PIB has a nominal value of 100p and pays a dividend of 12.65% pa in 2 instalments. ie every 6 months. The PIB is traded on the London Stock Exchange. The current price is ~170p which means the effective dividend is ~7.4%.
It appears that you have to sell / buy them in blocks of 1,000 shares. That is probably why you are a little confused.
If your Mum has 6,000 shares, they have a current market value of ~ £10,200 (170p*6,000). and will be paying a dividend of £757.5 per year (12.625% *6,000) or £378.75p every 6 months. ( March & September……I think!)
Hope this helps

threechoirs

Thanks so much everyone! This is amazingly helpful. I think they are indeed the LSE:NBSR 12 5/8% ones. I will have to go through her bank statements to see if any interest payments roughly align. Her finances are so disorganised - it's hard. 

The other thing that confuses me a bit is that she would have set this up in the late 80s or more likely 90s (she was out of the UK in the 70s). I am reading that these were risky but have historically been  very good investments - and I really can't imagine she would have put any less than 5K into one of these.

So if the whole thing is worth roughly 10k now, that seems like quite a bad investment for 30 years! Am I missing something?

wmb194

threechoirs said:

Thanks so much everyone! This is amazingly helpful. I think they are indeed the LSE:NBSR 12 5/8% ones. I will have to go through her bank statements to see if any interest payments roughly align. Her finances are so disorganised - it's hard. 

The other thing that confuses me a bit is that she would have set this up in the late 80s or more likely 90s (she was out of the UK in the 70s). I am reading that these were risky but have historically been  very good investments - and I really can't imagine she would have put any less than 5K into one of these.

So if the whole thing is worth roughly 10k now, that seems like quite a bad investment for 30 years! Am I missing something?

They were issued in September 1992. Your mother will have received those interest payments every year so, depending on the price paid, it should have been okay as fixed income investments go.

JANETSAVING

“ So if the whole thing is worth roughly 10k now, that seems like quite a bad investment for 30 years! Am I missing something?”

Don’t forget they have been paying her interest of nearly £760 per year…..every year !

They are paying a historical yield of 12.625% . But more useful for comparative purposes, based on the current share price of ~170p, they are yielding 7.4%. 

Now it depends on your perception of the risk (I couldn’t possibly advise), but where else can you currently earn that percentage interest on your savings ?

threechoirs

Thanks so much. So - I guess the clue is in the name?! - these were very much designed to pay out interest rather than grow as an investment? It just seems a bit mad that - if we have this right - they've paid out in excess of 22k in interest over those years, but the pibs themselves are only worth 10k?

Hoenir

threechoirs said:

Thanks so much. So - I guess the clue is in the name?! - these were very much designed to pay out interest rather than grow as an investment? It just seems a bit mad that - if we have this right - they've paid out in excess of 22k in interest over those years, but the pibs themselves are only worth 10k?

An indication of how high interest rates were in the past.  Around that time my fixed rate mortgage was around 10%. While they provide a good income. Remember that the original investment value of £6k is being eroded over time by inflation. 

JANETSAVING

Think of it as a fixed interest savings account, that, when interest rates are low, will offer some capital gain (growth).

wmb194

threechoirs said:

Thanks so much. So - I guess the clue is in the name?! - these were very much designed to pay out interest rather than grow as an investment? It just seems a bit mad that - if we have this right - they've paid out in excess of 22k in interest over those years, but the pibs themselves are only worth 10k?

You don't have to spend the interest, it can be invested as well.