Share Save Scheme

financial_illiterate

Hello

I am a member of my company's share save scheme, whereby I save a defined contribution each month for 5 years and at the end of it I get the opportunity to buy shares at a discounted price of Xp, which represents 20% less than the share price on the day the offer was made last year.

Coincidentally, the current share price is very close to Xp at the moment, and this years offer is 20% lower, lets call it X-20p.

I am one year into my contributions, and in four years time will get the opportunity to buy shares at 20p more than I could buy them for if I waited a further year.

The terms and conditions allow me to cancel at any time and get the whole of my money back. I am very tempted to cancel my current subscription and re-subscribe at the lower price, acknowledging I am starting again and will be one year further away from maturity. As I perceive it, my only risk is a stock market crash at some point between Dec 2013 and Dec 2014 meaning a nice opportunity of a profit on my Xp priced shares in 2013 will have been passed up for a negligible profit on my X-20p priced shares in 2014.

Obviously, nobody has a crystal ball and I'm not asking anyone to comment on the liklihood of a stock market crash in 2013/2014!! I'd just like to know what others would do in this same situation; it looks like a no-brainer to me?

[Deleted User]

Hi,

if you can afford it take up the new offer as well, then you will have them maturing year after year. You will probably find that there will be another offer next year.

CLAPTON

If this year's price is 20% less than last year's then it seems a reasonable thing to do to cancel last year and re-invest in the lower price this year...

financial_illiterate

[Deleted User] wrote:

Hi,

if you can afford it take up the new offer as well, then you will have them maturing year after year. You will probably find that there will be another offer next year.

I have considered/am considering that as well; there is also the option of taking the new offer on a three year deal so it matures a year earlier than the other one.

I'm a little hesitant though because I (perhaps wrongly) believe there to be a maximum £250 per month limit on contributions; so if I took the new option up at £100 a month (making sacrifices elsewhere!) I'd then not have an opportunity to do anything next year without cancelling one or the other (presumably the first one). But I suppose I could cross that bridge this time next year if there is another offer, better than the first one.

I'm just a bit hesitant to continue to commit another £7200 over four years to a scheme when I know I can get what looks very much like a better deal the following year.

Would appreciate further comments!

opinions4u

I'd cancel and start again at the lower option price.

Does the scheme have a 3 year choice as well?

financial_illiterate

opinions4u wrote: »

I'd cancel and start again at the lower option price.

Does the scheme have a 3 year choice as well?

Yes, but the bonus (in lieu of interest) on the savings isn't as generous.

opinions4u

The value of the bonus is drop in the ocean compared to the potential benefits.

I'd go for the 3 year scheme and each year start a new 3 year scheme each year (subject to the £250pm limit).

financial_illiterate

And scrap the current five year deal? Or give it a year to make my mind up? If the 2010 offer is higher than the 2008 offer, I could simply not take it next year.

(the 5-yr bonus is approx £700 more than the 3-yr one, that looks significant to me - am I being foolish?)

opinions4u

Scrap the 5 yr one, start again at 3 yrs and take it from there.

foofairy

I am a member of my companies share save scheme and I have been for many years..each year I take out another option I currently save £20 per month for every option that I have taken. so the max I pay at any one time is £100 per month. Although I do have the option to save upto £250 per month per option.

I take a 5 year option then a 3 year option and then a 5 year again changing them every year..this way when they start to mature you get one every year which comes as a nice little bonus.

Like you I get them at share price less 20% at the time of taking the option.

At the end of your option you need to make one of three choices you either sell your shares for a profit as hopefully the share price is higher than your purchased price. You can withdraw the money saved with interest if the share price is lower or you can keep the shares to sell at a later date.

I wouldn't cancel the option that you took last year as you are not losing any money.. share save is a simple way to play the market with no financial risk to you.

Hope this helps.

opinions4u

You could cancel the current option, place the funds accrued in a savings account and use that money to increase your payment in to a new option.

e.g. currently paying £50 a month; got £600. Close it.

New payment was going to be £50 a month for 3 years, but make it £67 instead. Transfer £17 a month from the savings account (£600/36 = £16.66) to subsidise your reduced net pay.

Buy the shares a year earlier at a cheaper price.