Advice on Employee Sharesave

jasmin10

My sharesave thing is up this month and I was hoping that someone could point me in the right direction as I don't understand the choices that I have been given and what the differences are.

I have £7,400 and want it all in shares as I will be cashing in a % in a month or so.

The things I have been offered are:

1. To transfer to a Halifax Share Dealing Account
or
2. To transfer to a Halifax Share Dealing Self Stock & Shares ISA. Any remaining shares should be transferred to a Halifax Share Dealing Account.
or
3. For a share certificate to be issued.

I don't particularly like the idea of number 2 and I don't want to risk my money in the stock market (if that's what it means). So whats the diference between 1 and 3? If I get a share certificate so I just phone someone up to sell some of them when I want to.

Sorry for my ignorance, I just hope someone can advise.

Thanks so much
Jasmin10

jon3001

All these options mean risking money in the stockmarket until you sell. Is there no choice to exercise your options (buy shares) and then sell immediately?

1. To transfer to a Halifax Share Dealing Account
This is a nominee account. You'll be able to sell online/by phone during trading hours (or put a sell order in out of hours).

3. For a share certificate to be issued.
I think you'll have to take/send it to a stock broker/bank if you want to sell.

I assume the options are worth exercising (despite recent market declines) rather than just having your cash back + interest? I.e. current share price is a fair bit higher than the option price?

turbobob

I thought that these schemes were normally share options. An option is the right but not the obligation to buy the shares at a pre-determined price. The option price is fixed at the start of the savings plan. At the maturity of the scheme, if its not beneficial to take the share option (for example if the option price is higher than the current value of the shares on the open market) then generally you can just take the money and interest.

For example, if the option price set at the outset was £1, and the shares are currently trading at £2.50, you would take the shares. You could immediately sell them if you wanted for a profit (it will be quicker to sell through a share dealing account than having a paper certificate, I think).

But, if the option price was £1, but in the meantime the shares have dropped to 50p, then it would not be worth exercising the option and you would take the money.

jamesd

jasmin10 wrote: »

My sharesave thing is up this month ... I don't want to risk my money in the stock market

Dismiss option 3. Stock market dealing with a share certificate is more expensive than using the Halifax share dealing account, so you'd choose option 1 instead of option 3 if you want to trade the shares. Like to sell some.

Option 2 is appropriate for someone who wants to transfer the shares to a stocks and shares ISA for long term saving and investing. That can hold stock market investments like the Shareshave shares you will get.

For both the share dealing account and the ISA you can immediately switch to cash to eliminate stock market risk (including the stock market risk of the shares in your own employer's company). Or to other shares or many other types of investment, they aren't limited to just shares.

However, you have a more important choice to make than this.

A Sharesave scheme sets the price of the shares at the start of the scheme period. You need to know that price and the stock market price of the shares now.

If the price now is lower than the price at the start, you should choose not to buy the shares at all. You would lose money if you did. So if the starting price was 2 Pounds and the stock market price of them is 1 Pound now, you would lose half of you money if you bought the shares. Even if you wanted to own the shares in this case, you'd take the cash and then spend half of it on the shares. You'd end up with the same number of shares and also with half the cash.

If the price now is higher than the price at the start, you should probably choose to buy the shares. If the price at the start was one Pound and the price now is two Pounds, you would double your money by choosing the shares. Then your safest option is to sell them all immediately if you don't want stock market risk that comes from holding the shares longer.

If the price now is close to the price at the start it can be difficult to decide whether to buy shares or take the cash. You can generally split the money as you choose between shares and cash so one option is to use half to buy the shares and take the other half as cash.

Since you don't want stock market risk, find out how the price now compares to the price at the time the plan started. If it's lower now or close, take the cash. If it's higher, go for the Halifax share dealing option and sell them all immediately so you no longer have the stock market risk of keeping them.

Remember that stock market risk includes the shares in your own employer that you get from the Sharesave scheme. It's also a worse risk than most other shares you could own because once you own the shares you can lose your job and all of the value of the shares at the same time if your employer goes bust.

david78

Assuming you take up the option to buy shares.

Don't dismiss option 2 lightly if you want to hold shares, investment trusts, or investment funds for the longer term.

The certificate (option 3) may also be useful in such cases, as you can transfer the shares into a stocks and shares ISA with another provider if you want to. There is a time limit on transferring the shares to an ISA of several months (I don't remember the exact figure). Technically, the shares are sold and re-purchased in the ISA wrapper. There is no exemption from capital gains that are above your annual allowance (this is probably not an issue for you unless you have made huge profits).

This option would allow you to go with an ISA provider which will allow you to switch your "single company" shares into funds if you want more diversification.

The number of shares that are transferred to an ISA will depend on how much of your £7200 allowance you opt to use. You will need to specify this on your application. Shares in excess of the amount specified are either returned to you as shares or sold and returned as cash.

Don't forget you will also get a small "tax free" cash bonus as well as the shares.

jon3001

david78 wrote: »

Technically, the shares are sold and re-purchased in the ISA wrapper. There is no exemption from capital gains that are above your annual allowance (this is probably not an issue for you unless you have made huge profits).

Not true. It's a transfer (not a sale and repurchase) and CGT can be avoided.

http://www.hmrc.gov.uk/ISA/faqs.htm#19

Can I put shares from my employee share scheme into my ISA?
A. You can transfer any shares you get from

• an HMRC approved SAYE share option scheme run by your employer (that is, a savings related share option - 'Sharesave’ - or profit sharing scheme), or
• a Share Incentive Plan

into a stocks and shares component of an ISA without having to pay Capital Gains Tax - provided your ISA manager agrees to take them. The value of the shares at the date of transfer counts towards the annual limit.
This means you can transfer up to £7,200 worth of shares in each tax year (assuming that you make no other subscriptions to ISAs, in those years).
You must transfer the shares within 90 days from the day they cease to be subject to the Plan, or (for approved SAYE share option schemes) 90 days of the exercise of option date. Your employer should be able to tell you more

david78

jon

I believe that "without having to pay Capital Gains Tax" refers to future gains inside the ISA and that gains made in a SAYE scheme at the point of transfer are subject to CGT if they exceed the annual allowance.

If you read the pdf guidance note for SAYE schemes and ISA transfers, the wording is different:

http://www.hmrc.gov.uk/shareschemes/saye_faqs_ees.htm#19

http://www.hmrc.gov.uk/shareschemes/employee-guidance.pdf

David.

jon3001

david78 wrote: »

jon

I believe that "without having to pay Capital Gains Tax" refers to future gains inside the ISA and that gains made in a SAYE scheme at the point of transfer are subject to CGT if they exceed the annual allowance.

David.

There's no sale involved though. How is a chargeable gain realised?

david78

jon,

I've edited my post.

jon3001

Ok - there's some different wording, but what distinction are you making?

You can transfer any shares you get from

• an HMRC approved SAYE share option scheme run by your employer (that is, a savings related share option - 'Sharesave’ - or profit sharing scheme), or
• a Share Incentive Plan

into a stocks and shares component of an ISA without having to pay Capital Gains Tax - provided your ISA manager agrees to take them. The value of the shares at the date of transfer counts towards the annual limit.

This seems most clear to me.

david78

It seems I might be wrong. I hope I am.;)

This site seems to be clearer (scroll down to SAYE).

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/WorkingAndPayingTax/DG_10022224