Employer share save scheme..

zudecke

Hi,

I opted in to a share save scheme with my current employer about 2 years ago.

Unfortunately the option price is completely unbelievable and I am thinking of just cashing out.

Wanted to understand something before hand though. I was always under the impression that the monies paid in would generate some interest. As of now, the balance is just what I paid in.. £0.00 has been added in interest. Anyone know how that works?

Also, it says under "Shares" :

Granted shares - 998
Under option - 998
Exercised - 0
Lapsed - 0

What does that mean exactly?

Regards,

Z

bungle4by4

on my latest share save, there is no interest paid. if you cash out, or even if you do not take the option at completion, the payout will only be what has been paid in.

chris_m

zudecke wrote: »

Wanted to understand something before hand though. I was always under the impression that the monies paid in would generate some interest. As of now, the balance is just what I paid in.. £0.00 has been added in interest. Anyone know how that works?

It varies from scheme to scheme, even within the same company in different years. Some pay interest after the first year, some pay none. Some add a bonus when the saving plan reaches maturity, those also vary from year to year.
To be sure whether any interest should be due, you need to check the details for your scheme. It may prove better to keep it going if there's a bonus at the end.

Also, it says under "Shares" :
Granted shares - 998
Under option - 998
Exercised - 0
Lapsed - 0
What does that mean exactly?

To me, it means that you've been granted options to buy 998 shares at the option price when the scheme matures, you've exercised that option on zero shares (because it hasn't yet matured) and have zero shares in lapsed (not exercised and after the six-month deadline for exercising) options.
I suspect the latter is there so it can cater for several year's schemes and would give the totals for all schemes in which you had participated.

Snooping4Value

Hang on guys. There is still a reason to save in the scheme depending on the scheme's t&c.

@Zudeke: The price of your shares may be substantially lower than the option price. However, it may still be well worth saving the money in the Sharesave scheme.

The reason for that, depending on the terms of your scheme, is the potential tax saving feature. My current Sharesave scheme allows me to put in cash from my salary untaxed into the scheme. At the end of the 3 year scheme, I have the option of buying the shares at the preset option price or the option of taking the total sum of cash untaxed.

Under the current interest and taxation climate, I do not think I can get a better deal anywhere else. And it is guaranteed to £50k (or £85k) with the financial institution. Assuming your sharesave scheme has similar t&c s, I think it is well worth it if you can afford the saving for 3 years or however long the saving term is. If you choose to leave the scheme and save your cash elsewhere, you may find that cash gets taxed as your income, and then the interest on the cash gets taxed as well.


Ok. Sorry the above is wrong. The scheme is based on net salary contributions.

cmorgan091

Snooping4Value wrote: »

The reason for that, depending on the terms of your scheme, is the potential tax saving feature. My current Sharesave scheme allows me to put in cash from my salary untaxed into the scheme. At the end of the 3 year scheme, I have the option of buying the shares at the preset option price or the option of taking the total sum of cash untaxed.

I am pretty sure that the Save As You Earn (SAYE) scheme is based on net salary contributions (after tax), whereby you save the money for a fixed period and at the end can use that money to buy shares at a price that was agreed at the beginning of the scheme. In previous years HMRC allowed the paying of a bonus in the form of interest on this, however I understand that for this years schemes that are of a 3 year nature, no bonus interest is allowed.

I think you are confusing this scheme with the Buy As You Earn (BAYE) scheme, which allows you to purchase shares using your gross salary (pre tax) and thus effectively get a discount on day 1 of either 20% or 40% on the shares depending on your nominal tax rate.

In regards to the OP's question it would be worth understanding how far off the present valuation of the shares is from the option price. If it is never going to recover to that level it is likely to be worth exiting from it and investing in the next round (which will have a lower option price) and doing something more productive with the capital release.

C

ses6jwg

I just did the same, I cashed in a 5 year plan after 18 months as the option price has become unrealistic.

No interest has been added as I expected.

However I did enrol in the latest issue which set the option price just at the peak of the most recent Euro bailout worries!

zudecke

Thanks for the info guys.

Likewise, there is now a new scheme with a much, MUCH lower and more realistic option price... Alas, doesn't mean I can transfer time or fund, so a bit pointless for me as I don't want to enlist to ANOTHER 3 years..

zudecke

Snooping4Value wrote: »

Hang on guys. There is still a reason to save in the scheme depending on the scheme's t&c.

@Zudeke: The price of your shares may be substantially lower than the option price. However, it may still be well worth saving the money in the Sharesave scheme.

The reason for that, depending on the terms of your scheme, is the potential tax saving feature. My current Sharesave scheme allows me to put in cash from my salary untaxed into the scheme. At the end of the 3 year scheme, I have the option of buying the sh??ares at the preset option price or the option of taking the total sum of cash untaxed.

Under the current interest and taxation climate, I do not think I can get a better deal anywhere else. And it is guaranteed to £50k (or £85k) with the financial institution. Assuming your sharesave scheme has similar t&c s, I think it is well worth it if you can afford the saving for 3 years or however long the saving term is. If you choose to leave the scheme and save your cash elsewhere, you may find that cash gets taxed as your income, and then the interest on the cash gets taxed as well.

Good points BTW. Reckon paying no tax on ur allocation directly from gross salary is better than any bank interest rate? i have about £5k in there

cmorgan091

zudecke wrote: »

Good points BTW. Reckon paying no tax on ur allocation directly from gross salary is better than any bank interest rate? i have about £5k in there

@zudecke - You should check this as I am pretty sure that it will have all come from your NET salary, so you have already paid tax on it. The money is effectively sitting in limbo (assuming no bonus payments are applicable) and so by leaving them there their "value" will be decreased by inflation.

The sharesave schemes are very good if you want a safe way to invest (as no risk) with the chance for a good reward. If the shares are significantly down right now then it is likely to be a good time to put money in, as in 3 years, if it is a good company (you haven't given any details) the share price should have increased considerably and you will have an opportunity to make a good amount of money.

Re: no bonus on 3 year SAYE - http://www.hmrc.gov.uk/shareschemes/saye-change-bonus.htm

Re: SAYE as take home (net pay) - http://www.hmrc.gov.uk/working/bens-shares-tips/shareschemes.htm#2

C