Savings Related Share Option Scheme

madkingsoup

I've got a chance to pay into an SAYE scheme with the company I work for. Our FD has confirmed that the government has set a zero bonus/interest on these schemes at the moment, so my question is:

If the share price hasn't increased sufficiently at the end of the 3 year term and I cash it all in, all I'd get back is the money I paid in?

This makes it seem like it's a 100% on the company share price going up, where previously you could also depend on interest payments as well.

Have I understood this right?

latecomer

Yup - my last company did the same. If the share price stays static or drops you get back what you pay in with 0% interest. If the share price goes up then you gain.

Vortigern

madkingsoup wrote: »

Our FD has confirmed that the government has set a zero bonus/interest on these schemes ...

Your FD is right. The government sets the rate. I thought they were meant to encourage people to invest in the companies they work for?

opinions4u

I think the previous "bonus" was in the region of 1% AER tax free. A best buy easy access account will pay you less than 2% after tax today.

It's worth giving up that 2% for the leverage opportunity a Sharesave scheme gives.

Price up the maximum loss at 2% and compare it against what you'll get if the share price drops 10%, stays still, goes up 25%, doubles etc.

Tiny stake - your interest.

Massive potential gain if you sign up.

mulronie

Even without the "interest" you'd still be mad not to sign up if you can afford the monthly outlay

The only downside risk is the 2% a year you'd miss in interest, the upside potential is literally thousands of pounds (tax-free might I add).

madkingsoup

Thanks guys. I understand the concept now, but the potential gain seems to me to be very limited and hyperbole turns me off. Tempting me with "literally thousands of pounds" means nothing as the share price of my company is not going to go up by over 40% in 3 years, let alone double... Similarly "massive potential gain".

Realistically, all I can see is maybe a £100 more than a savings account over the time, and with a savings account there's no risk of a 0% increase.

I think I'll sleep on it... :-\

markwilkinson

I do ours each year, the option share price is discounted by 20%, so even things stay the same your already that much ahead. Granted, the price could fall by >20% but you should have the option of keepi g them and selling at a later date. The company I work for pays a decent dividend and use another scheme to buy shares for that reason. In my case, if I do get a year where there isn't any money to be made il just hang on to them for the dividend.

madkingsoup

And suddenly I see why it's not worth it. Ours isn't discounted, and the dividends are pennies.

opinions4u

Heads you win. Possibly lots.

Tails you break even.

It's a no brainer.

mulronie

madkingsoup wrote: »

the potential gain seems to me to be very limited [...] the share price of my company is not going to go up by over 40% in 3 years, let alone double

The potential gain by definition is actually near-limitless. You just think it's "very limited" because for whatever reason you are near-certain that the share price won't be 4% higher than the option price at the exercise date. Much stranger things have happened.

madkingsoup wrote: »

hyperbole turns me off. Tempting me with "literally thousands of pounds" means nothing [...] ... Similarly "massive potential gain".

I'm not in the business of tempting people. Why would I? Bluntly put I won't benefit from your decision either way. The point of my post was to outline my view that SAYE schemes are always worth subscribing to, especially in the current low-rate environment.

Try telling the people at Asda that their potential gain was very limited, or that none of them would benefit to the tune of "literally thousands of pounds".

madkingsoup

I'm sorry. I'm grumpy today. It's good advice.