Sharesave scheme

jbmadd

I have the option of investing in a sharesave scheme. I think it's fairly standard and similar to others in that the option price is at a 20% discount to the share price at the start and the maximum monthly contribution is £500 - either 3 or 5 years. There is no interest paid on the money.

I already think it's a good idea to contribute, but I'm not sure about the best way to do so. As far as I understand, you can only contribute £500 / month in any given month. So, for example, if I contribute £500 / month for three years, I won't be able to enter any future schemes until I've finished this one after 3 years.

So I was thinking of doing the following, assuming that they have one every year.

Year 1: £100 into 3 year scheme, £40 into 5 year scheme
Year 2: £100 into 3 year scheme, £40 into 5 year scheme
... and so on, every year.

This means that from Year 5 onwards, I would be contributing the maximum £500 / month, but at option prices from Years 1,2,3,4,5.

In my mind, this is spreading some of the volatility of only being able to set the option price every 3 or 5 years, and it means that after 3 years I will be exercising some options every year and so have a steadier cash flow.

The downside of course is that I am not contributing much in the first few years, but this may be an upside as well, since £500 per month is quite a lot.

Any thoughts? Does anyone else contribute to sharesave scheme? Does anyone else spread the contributions?

PeacefulWaters

When I was younger I staggered things to have one maturing every year.

Now I'm pondering retirement in a decade or so I'm chucking everything into one scheme and crossing everything in the hope of a whacking great sum to feed a pension with.

There's no right and wrong answer to what you should do. I'd be surprised if you could choose to subscribe across two terms that commence at the same time though.

traineepensioner

Do you have different share option prices for the 3 year & 5 year schemes? If not, I would just go for the 3 year schemes.

Comyface

With our sharesave we could only pick one option per year, ie 3 yr OR 5 yr. Can you do both with yours?

jbmadd

Thanks for your replies.

Yes, I checked and I can definitely subscribe to both the 3 year and the 5 year. I suppose the benefit of the 5 year is that you are more likely to have a lower exercise price. Or maybe I should just subscribe to the 3 year and put add £167 each year.

Of course, there's no guarantee that they will offer it every year or that it will be in the same month every year. And I may not even be working there in 5 years' time!

@PeacefulWaters Yes, I would intend to wind down the spread as I get closer to retirement. For the moment though, I don't particularly like the idea of having these large cash flow every 3 years and nothing in between. It also means I'm more dependent on the share price at very specific periods of time.

jonnyb

So my title says it all. It really depends on how you think the share price will change.
If you think it will go up over the 3 or 5 year period, why wait until future years to start other schemes, which will have higher option prices ?
If you can afford the full £500 now, I would do it all now, over whichever period you think. The great things about these schemes is that if the price drops below your option price, you can cancel your subscription at any time, get the money back, and start again the following year.

I did one of these with my company starting in 2008 and made big returns over 5 years.

traineepensioner

"The great things about these schemes is that if the price drops below your option price, you can cancel your subscription at any time, get the money back, and start again the following year.".
Used to be able to do this at my (ex)company......Until they changed the rules :-(. If you cancel now you couldn't re-invest until after the option period.

OP, these schemes can be a great way to save/invest but I think you need more information.

kangoora

traineepensioner wrote: »

"The great things about these schemes is that if the price drops below your option price, you can cancel your subscription at any time, get the money back, and start again the following year.".
Used to be able to do this at my (ex)company......Until they changed the rules :-(. If you cancel now you couldn't re-invest until after the option period.

OP, these schemes can be a great way to save/invest but I think you need more information.

Yes, check on this statement. My company scheme said it is now legislation that if you cancel a share save option you ca't recommence saving until the end of the original payment period was due to end.