Oppertunity

kangoora

Buying the shares pre-tax isn't bad but the better scheme is the sharesave options IMO

The sharesave options is a no-brainer. I did very well out of it several years ago, getting sharesave options for 80p and selling for £3.50+

You aren't actually buying the shares until the end of the 3 or 5 year period so if the share price drops then you just withdraw the money you 'saved' and decline the option to buy the shares so you can't lose any money (except for any interest on the amount you saved).

On the 5 year deal I think you get a 20% discount on the current share price (i'm not current on this having retired a couple of years ago) so you are already gaining, assuming the price doesn't drop by more than 20% .

If the price goes up then you can make a nice profit.

lozzy1965

I may be out of touch with modern share saves, but they certainly used to be a no brainer. The key is, can you cash in the money you have invested if the share price has dropped? If so, throw as much money as you can at them because the discount price is good, and you can always take the cash if the price has dropped below the discount price.

bowlhead99

bradqwer wrote: »

Care to elaborate n was this a BT share scheme

No, it was a company called Interserve, which found itself in financial trouble.

With any company from the biggest to the smallest, the value of shares in the company can go up and down over time, and can even become worthless if the company collapses. If you buy shares, even at a discount, and keep hold of them for a while rather than selling, you have a risk that the shares might become worth a lot less than you paid for them, before you decide to sell them.

However, the scheme you are describing is a 'share save' scheme where you put money away each month into a savings pot (without buying any shares just yet) and at the end you are allowed to choose whether to buy the shares at a fixed option price (which you could then sell straight away at a profit) or simply not buy the shares and take back the savings cash.

At the end of the scheme when it 'matures', you would only exercise the option to buy the shares if it was in a profitable position (i.e. the shares could be sold right away for more than you just paid for them) and you are under no obligation to hold the shares for a long time if you do decide to use your option to buy the shares - you can just sell them for a profit straight away. So, there is minimal risk of losing money in a share save scheme due to a fall in value or total loss of value of the shares while you held them, because you only hold them after maturity/ completion of the scheme, and maybe only for a few days.

If you are using a different type of share incentive plan where you buy shares as you go along (rather than doing the share save scheme where you save up money towards buying the shares through a special option at the end), then you would be the owner of the shares and have all the risks and rewards of that ownership, which could include the shares falling in value or the company going bust while you owned them in the plan. Those schemes do usually allow you to invest pre-tax money as long as you keep the shares for a certain length of time, but you have the risk of the price falling to less than you paid.

So, share save schemes are the safest version of the different types of scheme that the employer might let you contribute to.

The comment from Capital0ne that "Interserve share save scheme proved to be a big mistake!" is misguided. If the company goes to the wall while you are in the process of saving up to buy shares in it, you won't exercise the option and be able to make the great profits you had hoped you might make. But in the meantime, the money will have been looked after by a trustee, separate from the company's own funds, and be safe from loss, so you'll just get back the money you saved with them.

However, that doesn't mean it was "a big mistake" to join the scheme. It is nearly always correct to join a scheme that offers a potential good upside return and very minimal downside risk. It's like if you played a gambling game: heads you win, tails you don't lose. If it comes up tails, it's a shame you didn't win but it was hardly a "big mistake" to play. Likewise if BT drops significantly in value during your sharesave scheme, you might not make any profits, but you won't be a big loser either because your money was safe.

Basically the comment from Capital0ne is just scaremongering - he was trying to be funny, but probably didn't actually understand how a sharesave scheme actually works. The risk to you is only *after* the sharesave scheme has finished and you've bought the shares, if you choose not to immediately sell them and cash in your profits. Some people won't sell them immediately, in some cases because they are greedy and hope for more profits the longer they hold, without realising that there are significant risks when holding shares in a single company.

Shashy

The BT sharesave scheme is post-tax, not pre-tax.

It's also only opened up for new subscriptions once per year, in summer.

BT also run a direct-share scheme which is pre-tax, but offers no further benefit around option prices etc. You also need to keep these shares for x years to realise the tax saving.