Is this a no brainer

456elsbot

Is this a no brainer or am I being a little naive.

I’m currently opting into a company share option scheme. I purchase £125 per month minus tax (40%), and get £125 worth of matching shares from the company.

After 5 years they are completely tax free and can be sold on a rolling programme, as each batch of shares matures each month after five years.

I’m currently cashing them in as they become available free of tax and paying them into my pension, thus receiving the 20% government contribution and claiming the higher rate back at the end of the year.

Am I doing the right thing or am I missing something.

Be gentle - it’s my first post

LHW99

Seems reasonable IMO, if you don't need the funds for something before you are 55 (SPA - 10 years).
It may not be good to have a large share investment in the comapny you also work for, as if they did get into trouble, not only are the shares likely to drop in value but your job could be up the pan too.
You could always split the proceeds between a pension & an ISA where anything you take out isn't taxed

andyboyo

I'm in a similar scheme but ours double matches, so £250 for every £125.

I also use mine to top up my SIPP, but I don't sell every month as there's a charge of 0.5% (minimum charge of £25). I do it towards the end of the tax year when I roughly know how much I need to take me out of HRT liability, or if the shares have a particularly good run I'll do it beforehand.

Anything not required for my SIPP either gets diverted to my S&S ISA or tops up my cash fund if I've had more than the usual unexpected expenses that year.

456elsbot

Many thanks for the responses.


The total paid into the share scheme each month is £250 so must be a similar scheme. It only costs me £75 However.


I forgot about the charges for cashing the shares in, although by luck rather than plan, this is ok as I've just cashed a lump sum of £3k worth. I have only just realised the potential benefit of cashing in and a loading pension approach. Going forward I will adopt a similar approach suggested and do 6 month or 1 year sale to absorb the fee.


ISAs maxed for this year, but take the point and will consider this in the future. My main goal was to max the free money from paying into a pension, particularly since I have just turned 55.

andyboyo

Ours is £125 pre tax from me and matched with another £250 company contribution so effectively £325 for £75 post tax income.

We also get dividend shares paid quarterly which at the moment is yielding approx. 5% pa.

456elsbot

Sorry misunderstood. £325 for £75 is superb.


Ours also pays a dividend which has been about 6.5% pa paid half yearly.


The bizarre thing is that take up is only 50%

steampowered

Having a significant sum of money tied up in only one company is high risk.

Selling the shares and using the money to invest in more diversified assets is a sensible thing to do - with tax relief being the cherry on top.

bostonerimus

Company share purchase schemes are great, but should be used in addition to pension savings that are invested in the broad market. There are horror stories of pension schemes invested in company stock going bust when the company fails. I had a colleague who worked for Polaroid and basically lost 30 years of pension savings when the company folded and has had to work as a consultant to fund retirement....he's in his late 70s and still has to work

andyboyo

Take up in ours is >99%.

andyboyo

Agreed. I regularly sell off portions of mine to diversify elsewhere.

steampowered wrote: »

Having a significant sum of money tied up in only one company is high risk.

Selling the shares and using the money to invest in more diversified assets is a sensible thing to do - with tax relief being the cherry on top.

andyboyo

Fortunately I have a good DB scheme as well with the company.

bostonerimus wrote: »

Company share purchase schemes are great, but should be used in addition to pension savings that are invested in the broad market. There are horror stories of pension schemes invested in company stock going bust when the company fails. I had a colleague who worked for Polaroid and basically lost 30 years of pension savings when the company folded and has had to work as a consultant to fund retirement....he's in his late 70s and still has to work