Company Share Save Scheme, withdraw and reinvest?

LW7

Each year my company offers a share save scheme for 3 or 5 years, with an option price around 20% lower than current market price.

I have a 2018 5 year scheme, which I contribute £25 per month into, the option price in 2018 was £3.84 per share. Meaning over 5 years, I will have saved £1,500.

In 5 years, I can then buy £1,500 worth of shares at £3.84, which is c390 shares - at any time in the 5 years scheme, I can take my savings back, with no implications, and obviously don't earn any interest on this money.

We have just offered a 2019 Share shave scheme, which gives us an option price of £2.86. If I signed up for another £25 per month contribution, I would again have saved £1,500 over 5 years, but at the end I would be able to buy £1,500 shares at £2.86, c524 shares, a difference of 134 shares between the two schemes.

At current share price of £4, the 2018 share save scheme would mean my shares are worth £1,560 (£60 profit) in 4 years time.

At current share price of £4, the 2019 share save scheme would mean my shares are worth £2,096 (£596 profit) in 5 years time.

My question there is, with the 2019 option price being far more attractive, is it a consideration to pull my money out of the 2018 scheme (£300)and place that, plus the expected monthly £25 contribution for the next 4 years, into the 2019 scheme.

This would mean I would put £50 per month in but would not be able to "dump" the £300 withdrawn from the first 12 months of the 201 8 scheme.

As If I ran the two schemes together, if the price were to stay at £4, in 4 & 5 years when both plans mature, I would have invested £3,000, and made £656 profit.

Where as, if I invested £50 per month over the the next 5 years scheme, I would have invested £3,000, and would be able to buy c1048 shares on maturity.

Which, if we take £4 per share as an example, would be worth £4,195, a profit of £1,195, almost double what the 2018 and 2019 schemes would be together after a similar period.

Obviously, I can't rely on any share price being anything, with brexit, the tensions in Iran and the US, so nothing is a given. Guess I need to decide if I wait another year for one to mature, and potentially double my money. If the price rises over £4, I'd be going above doubling my money.

What are your thoughts?

Does this seem more faff that it's worth for £1,200 profit, as £50 per month for 5 years is a long investment.

I must admit, it is nice when you have one of these running every year, as get a matured scheme each year as a nice lump sum, or with some profit.

Just not sure if this is the best way to save and if there are better options outside my company to consider.

bowlhead99

The two schemes will mature at different times and you don't know what the share prices will be at those times. It's highly unlikely that either of them will be exactly £4 or that they will be the same price as each other. The new one might have a lower eventual share price (people hope that values rise over time, but it doesn't always happen - as you can see by comparing this year's share price to last year's).

If you give up your current scheme and go for the one that's only just starting and won't mature for 5 years, and then you want to leave the company for a different opportunity (or get fired) in four years time, you may not get anything at all, even if the share price was £6 at that point and the new scheme looked like it was going to make you loads of money.

What you can say is the more you invest in total to these schemes, the more profit you will potentially make - and if the share price goes down instead of up over the period, you won't actually lose any significant money (you just miss out on a bit of back account interest you could have got on a high interest bank account balance, and take your money back). So, another £25 a month into a 'heads you win, tails you don't lose' scheme is not a bad thing to do.

There isn't really another 'real world, outside the company' investment option that offers a chance to make lots of money with the downside of losing no money. I would be committing as much money per month as the company would allow me - although, granted, I probably have more spare income than you.

What I would perhaps do in your shoes is spread your options about:
- Keep going with the scheme you have which matures in 4 years
- Start a new scheme in the new deal which matures in 5 years
- Start a new scheme in the new deal which matures in 3 years

(You didn't mention a 3-year scheme as an option but there nearly always is one offered).

£75 a month might seem like a lot but saving is a very good discipline to get into, and you will presumably get pay rises over the next 3,4,5 years which will make it easier.

crumpetman

I have been in a similar situation but as I was contributing the maximum I thought it better to close the existing scheme and get my money back then start on the new scheme as the option price was quite a bit lower.
If I had not been contributing the maximum then I probably would have done as bowlhead99 suggests and that way you have schemes maturing at different times with more options available.

LW7

Thank you to you both for the input, much appreciated.

Currently it's minimum £5 per month to a maximum of £500 per month.

In years gone by, it's always been nice having a scheme mature each year and provide a little bit of money at the right time of the year.

There is indeed a 3 year scheme, although I need to reasearch the different between the 3 and 5 years in respect of terms and conditions, as the money does come from your take home pay, not pre tax.