Company Saving Scheme - The best way to save!

worcester1

Hi just wanted to start a thread on company share saving scheme (CSSS), share my expereince so far whilst at the same time seek advice from the good people of this board.

I work for a great great company 'Home Insurance Company (Walsall, west midlands)' who specialises on plumbing & drainage cover, among every other type of home insurance cover you can think of.

Exactly a year ago I joined the company share saver scheme - £200 p/m so far has saved £2,400 and got two more years to mature (3 years in all). I find this a great way of saving and at the same time giving myself a chance of getting a small slice of the company success. The £200, comes out of my wages - so the saying goes "if you haven't got it you can't spend it or miss the money for the matter. My monthly budget is based on my wage less the £200 - so I work my budget around my take home pay, like everyone else.

The way it works, as some of you already know is, you save towards having an option to purchase company shares after 3 or 5 years (optional). The savings accounts are managed by Yorkshire BS - 3%p/a interest.

The best part of this is that;

The company shares were offered to employees at Jan05 price less 20% discount. In our case, they were at £12 per share at the time so we got each share for £9.

The current share price is now over £18 per share. So as long as the share price remain at this level, when my savings matures in Jan09 it would be £7,200 + the 3% that Yorkshire BS pays.

Provided that I use all the £7,200 (less interest) to buy shares, they would then be worth £14,400 if I decide to sell them the day after.

They will be worth more if the share prices go up and less if they drop. The only time I stand to lose out is, if the share prices =<£9 at the time of my savings maturity.

Has anyone out there joined a CSSS in the past, currently in one or simply has some expertise on the matter? Please share your experiences and advice on the pro and cons.


Thanks alot everyone.


PS- I will be saving another £50 per month on the new CSSS which starts in Feb07 - the maximum amount you are allowed to save in a all CSSS is £250

Lazy_Runner

My experiences with a CSSS aren't great, but others have done well out of them.

My former company went public in 1995. I joined in Jan '97. The CSSS was offered every year in September.
Between Jan and Sep I had heard how the company had doubled in share price every year since '95.
I joined the scheme in September that year and committed to saving the maximum amount possible for the mandatory 5 years.
After joining the share price continued to double every year till 2000. When the market collapsed, especially the share price for my company, which was an IT consultancy.
The share price collapsed and we continued saving, because we had no choice, and it would be another 2 years before we could collect.
The work dried up and we merged with another company and then bought outright by a 3rd company. The share price continued to slide.
At the time of maturity, I elected to take the cash as the share value was below my savings.

At the time of joining the company there was an offer from one of the banks to take a loan to buy shares in the company. This was a longstanding arrangement for the 30 years prior to going public. The loan was administered through the company. Obviously there was the risk that if the company went down, you would lose your income and continue to make loan payments.

But with hindsight, (isn't it wonderful?), I would have taken the loan and sold the shares at the market height or at least soon after. This would have paid off the loan and I would still have made a massive profit.

So my thoughts are:
1) If you were an outside investor, and if you had a chance to invest your already hard earned cash, would you buy shares in your company?
2) How do you see the future for your company?
3) Can you commit the amount for the full term? Do you plan any life changing events in the next 3 - 5 years where the montly payments could be used differently?

Hope that helps.

Lazy_Runner

Your company sounds like it is a cash generating company which is probably a good thing, but I am not an expert. I seem to remember that Warren Buffet likes insurance companies because of their cash generating potential, payouts aside.

I thought my company was great and they treated employees really well. But our company was eventually bought out by a rival commercially minded company whose share price always did better that our company. I think the stock market liked our rival more than us, which is fine when the times are good. When times are not so good, it is the commercially minded companies that will survive (probably).

I am sure you are aware, you will have to think differently as an employee to that as an investor.

worcester1

The £200 rising to £250 from next month along with my pension contribution is something I just wipeoff/ignore when planning out my budget. I earn just above the national average - £1,700 after tax and NI contribution . So yes! it would be nice to have the £200 in my hand to spend as I wish but i look at this as something to put up with for the next two years.

My company has just gone into the American insurance market (which is huge) with a initial 1.3 customer acquistion, it also has companies in France and Spain.

Even if its UK business doesn't perform well - which is very unlikely to happend within the next 3-5 years. The American hand of the company is expected to do really well, so the share price should continue to rise or at least stay at the £18 per share mark. The worst that could happen is for a big stockmarket crash and the share price falling below the £9 mark.

I think this is a very good way to save and all employees should consider joining a share saving scheme if their company has one. A small contribution of £50 per month provided that they can spare to do so for 3 or 5 years is better than the interest you will get from any high street or websafer accounts. I am also saving with halifax bank £250 p/m (7% regular saving) and the interest I will get after one year is a measly £168 after tax.

jonnyb

if you scheme is like mine then you cannot lose.
if you have an option to buy, and are not committed to buy, and the share price is less than your option, you just take back the money you have saved.

worst case is it has earned a bit less interest than if you put it in a higher rate savings account.

worcester1

Jonnyb,

Mine is exactly the same.

It can be argued by some that you can earn a higher interest (3%) on your savings but the option to buy shares at a discounted price makes it better option.

dunstonh

Has anyone out there joined a CSSS in the past, currently in one or simply has some expertise on the matter? Please share your experiences and advice on the pro and cons.

I have been in two different versions in the past. One was excellent and made me bucketloads. A lot of that was down to stockmarket performance of the share. The other was rubbish and made no money and I ended up taking the bonus instead of shares as the value of the shares dropped significantly.

If the terms of the scheme are good and the potential of the company are good, then you can make loads. If the terms are poor or the company is poor, then you may end up with little.

Phoenix79_2

I've got three sharesave options going at the minute at work. I'll be taking out another one in July. Your limit is £250pm. My options are 2 x approx £6.50 and 1 x approx £7.70. Current share price is mid £9 and has been over £10 in the last few weeks. Its very unlikely that they will go down below my option price as i work for one of the biggest companies in the world that just gets bigger and bigger.

Its a great way of saving.