Prefs and Pibs: a safer bet than shares

With the base rate down to 2% and poised to go lower, the hunt for a decent income is on. And there are juicy-looking yields on preference shares and permanent income-bearing shares. Brian Durrant explains.

With the Bank of England base rate down to 2% and poised to go lower, the hunt for a decent income is on. You might be tempted by the juicy-looking yields on preference shares (Prefs) and permanent income-bearing shares (Pibs). Leading Prefs offer net yields above 7.5%, and many of those issued by financial institutions are in double figures. The trouble is, this year has taught investors the hard lesson that risk and reward are correlated assets that looked 'cheap' were priced as such because there was a chance the issuer would go bust. But with the government determined to keep the banks afloat, seemingly at any cost, is now the time to take the plunge?

What are Prefs?

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Brian has contributed to MoneyWeek with his expertise in investment strategy, for example how to quadruple your dividend income and how to navigate through the stock market in the 2008 financial crisis. He’s also touched on personal finance such as the housing market and the UK economy.