sharesave scheme question

webbhost

Hi all,

I've had a sharesave letter from my company giving me the option to save for3 years and then at the end of the 3 years I have the option to either take the money, or buy shares (in which the price is set now at about 20% below the market rate)...

It seems like a win/win situation because If the shares lose me money I just opt not to buy them and have my money instead, and if they're going to make me money then I can buy and immediately sell the shares (..right??)

Main question is what happens if the company I work for goes bust between now and 3 years time? Is it still "my" money because I have earned it and it's come out of my wages, therefore I have full control to close the account and not buy shares, or do I lose my money?

I am assuming 2 things - 1 - if the company goes bust, I don't lose my money, and 2 - I can buy shares to make a better value from my money and immediately sell again after at the higher price.

If someone can confirm this then that would be great, Thanks.

Perelandra

During the saving period, your savings will be held with a third party (bank) in a savings account. I believe this carries the normal savings protection.

Your basic understanding of the scheme is correct- these are "win/wins". There are two things ot be aware of, though:

At present you don't get interest on these savings- so you will lose out on some interest over the three years you are saving.

Once you've bought the shares, you will be exposed to the company share price (so if shares go down between you buying the shares, and selling them, you could lose out).

Otherwise, these are good schemes- I'm in my own employer's scheme.

gadgetmind

The only way you can lose with these schemes is to take the shares in three years, not sell straight away, and have the share price drop. Failing that, it's win:win as you say.

Most of these schemes have an option to turn cash into shares and sell straight away, which removes this risk.

MoneySaverLog

The only way you can lose is if the share price drops below the option price. But then you just do not exercise the option and take what you have paid in.

I say lose, cause obviously you're going to lose the interest on your savings.

But generally they're win-win. Pile in with the max, and watch out for Capital Gains liabilities which could be a problem, but there are ways to cut this legally up to a certain level.

webbhost

Thanks for the advice peeps, I have bought in with a clever little plan I have derived up ...

Firstly, it says I can "Buy *companies* shares at the share price fixed in April 2013, which has been discounted by 20% (the 'option price'), then you can either
- Receive a share certificate and become a shareholder; or
- Sell your *companies* shares on maturity and receive the sale proceeds to your bank account.

Im assuming this last bit answers the question posed by gadgetmind's post?

P.S. my plan is to put in £83 a month, then next year do the same etc.. By year 3 I'll be putting in the max that I can. When I get my first (yearly) bonus, I will put this money in a seperate account, divide it by 36 and give myself this much from the account per month

That way, once the bonuses start coming back, I'll be putting in £250 but gaining about £300 per month?

Easy way to get a simple self-earned pay bonus (dependant on what the share price is of course).

5t3ve

I put a similar question up recently, and I suspect you might want to have a read of some of the answers...

https://forums.moneysavingexpert.com/discussion/4502165

gadgetmind

webbhost wrote: »

(dependant on what the share price is of course).

Yes. These schemes are good because employees do well if the company does well as they are shareholders.

I see both sides. The people who work for me are thoroughly onside, work hard themselves, and expect (demand!) the same from me. I also have SAYE and other options so really want the company to do well for my own reasons.

I wonder whose legacy we have to thank for this.

markwilkinson

gadgetmind wrote: »

I wonder whose legacy we have to thank for this.

I like these schemes too. We get 3 or 5 year options with ours and rather than max out in a single year I've spread mine over enough schemes to give me an annual payout each year. This helps me max out my annual ISA allowance and add to my fixed rate bonds.

jonnyb

you need to consider where the share price is in relation to the last few years, and the potential for it to grow.
that way, you can decide if it is better to max out now, or do a bit each year.

for example, I am almost at the end of a 5 year sharesave. when the option price was announced at the start, I thought it was very low, and worthy of a much better price, so I maxed out £250 per month. It went from £2.91 option to current price of £11.21 !!

if I had not maxed out at the low price, I would have lost out on a huge profit.

Shaolin_Monkey

jonnyb wrote: »

you need to consider where the share price is in relation to the last few years, and the potential for it to grow.
that way, you can decide if it is better to max out now, or do a bit each year.

for example, I am almost at the end of a 5 year sharesave. when the option price was announced at the start, I thought it was very low, and worthy of a much better price, so I maxed out £250 per month. It went from £2.91 option to current price of £11.21 !!

if I had not maxed out at the low price, I would have lost out on a huge profit.

True, there can be better times than others. Some (but not all) schemes may allow you to cancel and take a refund of savings, and then restart in a new tranche if an extraordinary opportunity comes up. In March 2009 I opted to cancel an existing SAYE and join (and max out) a new one where the shares option price was set an extremely low level, because of the market conditions of the time. Nice little earner that..

markwilkinson

jonnyb wrote: »

you need to consider where the share price is in relation to the last few years, and the potential for it to grow.
that way, you can decide if it is better to max out now, or do a bit each year.

for example, I am almost at the end of a 5 year sharesave. when the option price was announced at the start, I thought it was very low, and worthy of a much better price, so I maxed out £250 per month. It went from £2.91 option to current price of £11.21 !!

if I had not maxed out at the low price, I would have lost out on a huge profit.

Totally agree! However, our share price is pretty stable and doesn't fluctuate in the way you you described. I'm a bit of a lazy investor and just bank on the 20% discount.