SharePlan ShareScheme Invitation - Queries

ThankYouAndEnjoy!

I’ve been offered the option of purchasing Partnership shares through work and I'm at loggerheads (with myself) over what action i should take. I think I know the answer - but it’s strange - If I write it here on MSE it seems to make more sense (plus I might get some valuable responses from other MSE'rs)

Basically, Im allowed to purchase betweem £10 and £125 of shares /month (Gross Wage). For doing this, my employer will also give me 'Free Shares' up to the value of £30. I’ve done some quick calculations based on the following criteria:

£125 contributed per month
£30 Free Shares Received
Share Price remains at £5.80 per share.

Over the course of the year, i would receive 318 shares (258 Partnership and 60 Matching) - Assuming the share price remains at £5.80, these would be worth £1844.40. On top of these would be the dividend (current yield approx 5.8%)

By not taking the share option I would receive £1500 Gross Wage (£125 x12) which after Tax and Insurance would leave £1029. So, summarising – I’m turning £1029 into £1844.40 per year (79.24% increase taking into consideration all remains equal)

Am i correct in the above workings??


Now, here are a few points to consider.

A – The Partnership Shares only become Tax + Insurance Free after holding them for 5 years. The Matching Shares only become mine after 3 years and again Tax + Insurance Free after 5 years. Therefore, to realise both to their full potential, I would need to keep them for the full term, gaining benefit thereafter on a monthly basis (5th year anniversary of each month Partnership/Matching Share Acquisition)
B – Fluctuating Markets – I have no idea what the future may be in relation to the FTSE – therefore I’m taking a gamble, but possibly one where I may be able to ride any ‘crash’. Based on the difference between £1844.40 and £1029 (£815.40) the share price would have to crash by 44% (at its current value of £5.80 to £3.24) to leave me being no worse of for taking shares over pay
C – No Fee for purchasing shares – BIG PLUS – Share price does not start in negative equity
D – Dividends. I would receive approx £1620 of dividends over the next 5 years

Again, Am I correct in the above workings

Other than my S.A.Y.E work scheme (which is risk free) this is my first opportunity to ‘play the stock market’
I don’t think I have missed anything out; and as a result, feel pretty confident that purchasing the shares is the best option for my money.
Would others agree? – If not; or if I have missed anything important, please comment.

Have other MSE’rs had similar opportunities?? If so what swayed you to choose shares over pay / pay over shares??

StevieJ

Depending on who your employer is it looks a no brainer to me, i.e. not heading for liquidation.
One other point, If you leave your job through redundancy, retirement etc you do not lose the tax free advantage even if you have not held for the required number of years.

ThankYouAndEnjoy!

StevieJ wrote: »

Depending on who your employer is it looks a no brainer to me, i.e. not heading for liquidation.
One other point, If you leave your job through redundancy, retirement etc you do not lose the tax free advantage even if you have not held for the required number of years.

Hello

Thanks for the additional information. The company is LloydsTSB, so little chance of liquidation there

One further question -

I might be taking utter nonsense, but can i transfer the shares purchased into an ISA, thus reducing TAX implications further? - or would they have to stay within the plan??

StevieJ

You can transfer the shares into an ISA when they have matured i.e. after 5 years.

Browntrout_2

It's a no brainer, presumably you can stop paying in at anytime and keep any puchased shares until the 5yr period is up, or just sell them and take the tax hit.

This is the case if you change employer I think.

If Lloyds TSB is not a bigger and better company in ten years than it is now (even as part of a larger group) then we are all toast.

In my opinion a large part of the general public cannot count and banks know who to profit from this.

Even if the market loses over 20% (crash definition) then you are pound cost averaging and getting more shares per month.

StevieJ

Browntrout wrote: »

It's a no brainer, presumably you can stop paying in at anytime and keep any puchased shares until the 5yr period is up, or just sell them and take the tax hit.

This is the case if you change employer I think.

If Lloyds TSB is not a bigger and better company in ten years than it is now (even as part of a larger group) then we are all toast.

In my opinion a large part of the general public cannot count and banks know who to profit from this.

Even if the market loses over 20% (crash definition) then you are pound cost averaging and getting more shares per month.

You are right, if they leave for another job (voluntarily) the tax has to be paid back.

The point about cost averaging is a good one but the gain would be there anyway with the tax saved 20/22% + NI conts or even 40%.

ThankYouAndEnjoy!

Thanks for your responses.

Im gonna go for the whole £125, maximising potential

My brother also works for LloydsTSB and currently does not participate. Might get him to do another £125 for me, doubling my exposure :j