The Co-operative Bank, along with a number of other financial institutions, would beg to differ, it seems.
An indication of just how easily even the most cautious of investors can be sucked down by the shifting sands of the financial world, the Co-op said that as part of its £1.5 billion rescue plan it is cancelling the coupon on £370 million of permanent interest bearing shares, or PIBS, making them effectively worthless.
Investors in the Britannia Building Society, which was taken over by the Co-op, are also losing out under the bank’s efforts to plug the black hole in its balance sheet in the wake of the vainglorious bid to buy no fewer than 632 redundant branches from Lloyds TSB.
Sadly, there is nothing new going here. The unwary who thought investing in the West Bromwich Building Society’s and the Bradford and Bingley’s PIBS, among others, would be safe were put through the same financial wringer in 2009.
It’s a symptom of the insanity that has gripped the financial services industry since the implosion of the sub-prime debt bubble in 2008.
But it means that for “permanent” we should read “liable to cancelled, scrapped or annulled at a moment’s notice and without consultation” it seems.
And it shows that when it comes to investing, sound financial advice has never been more necessary for those who need to protect their wealth and secure a good income in retirement. Thankfully, good quality financial advice is still available in the West Midlands from The Whitehall Partnership.
PIBS have long been a feature of the mutual banking and building society scene, and are typically held by pensioners attracted by what they rightly regard as a steady and permanent income of anywhere between 5.5 per cent and 13.5 per cent a year.
The chances are that few, if any, investors who sounded out the views of their financial advisers before plunging into PIBS would have been made aware of the fact that these instruments are ranked very low indeed in the creditors’ pecking order and are, in fact, the mutual sector’s equivalent of stock market-listed shares.
They would presumably have been just as unlikely to have been told that they would have no claim under the Financial Services Compensation Scheme should the PIBS-issuing society fail.
The Co-op Bank defended its PIBS default by saying that the seven thousand retail investors in the shares held less than £1,000-worth of them. That’s not much comfort for the seven thousand pensioners who rely on the interest they have been receiving to eke out their finances.
The need for impartial, thorough-going and independent financial advice concerning any form of investment cannot be stressed too strongly.
We at The Whitehall Partnership take pride in protecting our clients’ money and peace of mind by spelling out the potential costs and pitfalls any investment product or vehicle.
For a free initial consultation call The Whitehall Partnership on 0845 43 49 250 today.