Money Moral Dilemma: Should I take out a new train season ticket loan and invest it?

MSE_Kelvin

This week's MoneySaver who wants advice asks...

I usually get the train to work, paid for with an interest-free season-ticket loan from my employer. I'll soon be able to claim a new loan, though due to the pandemic I'm working from home and there's no word yet on when we'll be returning to the office. As I'm used to the repayments being deducted from my salary, I'm thinking of taking out a new loan and using it to buy Premium Bonds or putting it somewhere I can earn interest on it, but I'm worried this might be seen as abusing a work perk.

Unfortunately the MSE team can't always answer money moral dilemma questions as contributions are often emailed in or suggested in person. They are intended to be a point of debate and discussed at face value. 

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Jeremy535897

I assume this is a benefit in kind, and the official rate from 6 April 2020 is 2.25%. If you are a higher rate taxpayer, the cost is 2.25% x 40% = 0.9%. If you are a basic rate taxpayer the cost is 0.45%. The rates vary in Scotland. Whatever investment you make needs to produce an after tax return better than this, and also be able to be cashed in to fund the repayments at the appropriate time, unless you fund this by other means. Your employer will also have to pay class 1A NIC.

You need to check the terms of the loan, which may require you to spend the proceeds on a season ticket. Even if it doesn't, you need to consider what your employer's reaction would be to you doing this if they found out. This answers the moral question as well. If you really think it's worth the bother for the trifling return, ask your employer for permission.

JCS1

And what if the employer asks for proof the season ticket has been purchased?

gettingtheresometime

Why not put the monthly payments into premium bonds instead then there's no mmd is there?

Grumpy_chap

Given that your employer know you are not commuting for the time being, are they even actually offering the season ticket loan?

Given how low interest rates are at the moment, this seems like a lot of effort for little gain plus the risk that the employer takes a dim view.  In the current climate, no one wants their employer taking a dim view of them.

Thrugelmir

With interest rates at current levels is it going to earn much interest? 

As has has been said earlier difficult to see employers offering loans for no purpose. Particularly as they'll wish to conserve cash to see them through the challenges ahead. 

gt94sss2

Doing this will almost certainly be against the terms and conditions of your employers scheme

helene4266

gettingtheresometime said:

Why not put the monthly payments into premium bonds instead then there's no mmd is there?

If they do this what money will they use to buy a season ticket when work resumes?  Assuming it’s a yearly ticket it has to be paid up for front - which is why companies loan the whole amount to employees as a lump sum to buy the ticket and then deduct from their salary monthly?

richbrad72

This is almost certainly against the t and cs which will get you into to trouble, and is probably immoral too depending on your stance on businesses as moral entities.

If you are that keen to work the interest gap between a 0% loan and a savings account, it is far better to do so by balance transferring your ordinary monthly spending through credit cards and then shifting it to 0% rate 0% fee BT card... esp. if you use a rewards earning card on the front too.. 

antonic

I am a Civil Servant and I can apply for a season ticket loan (which I do every year).
Once bought I then have a month to show that I have bought the ticket, if I don`t its Gross Misconduct as I have breached the rules of the scheme , and the penalty for such a breach is dismissal.
You need to check your T&C`s in your staff handbook as the only thing you may win is the dismissal lottery.

sje_111

I am also working from home, I do not bother with a season ticket as my commute costs are relatively low
Even so, I am saving £40 per week and gaining 10 hours per week of my own time while not commuting - why don't you take your monthly payments and put those into premium bonds - then, when you go back to the office, you can start a new loan
Remember, the loan facility is ONLY there to help you with travel to work, if you do anything else with it I would think that could be considered fraudulent
Be grateful you CAN work from home, are saving the money and have extra time for yourself
Personally, I think it's a win-win situation and hope to be able to continue working from home for the foreseeable