Sharesave or ISA or pension?

older_and_no_wiser

A friend has asked me for advice on whether to opt in to their workplace Sharesave scheme. This is with SSE and they are being offered an option price of around a 20% reduction in the current share price - for either a 3 or 5 year term.

I've not been involved with such a scheme in the past, but it appears a good way to save and invest money providing you stay in employment with the company for the duration of the scheme.

I would suggest that this seems like a good scheme and it would encourage my friend to save without feeling the 'loss' of income too much each month. My friend has no debt - and owns their home mortgage free. They also have a decent emergency easy access fund.

I've been encouraging them to save more for the future where possible through a stock ISA and/or SIPP. So far, I've been unable to convince them! The question is, would the Sharesave scheme be a better investment than opening an ISA or new SIPP? I think the answer is a bit 'finger in the air' - although the lure of a heavily discounted share price is appealing.

My friend is around 20 years off retirement age. 

dunstonh

I made an absolute fortune on SAYEs in my younger years.   Thankfully I didn't hold the shares when they collapsed in value.    

The smart money will take out the SAYE, keep it until it is tax free to exit and then diversify with the proceeds.  Take out an amount each year so you then get a rolling maturity each year and repeat.

The biggest mistake that people do with SAYE is keep them where they are and end up with a very large holding in a single company which is very high risk.  I know some bank staff that were millionaires through SAYE and profitshare and lost virtually the lot in the credit crunch.

Edi81

Sharesave forces you to out the money away and not touch it. I’ve made on them
but I’ve also walked away with just my cash with no interest so they are not guaranteed.

eastmidsaver

i've never done a sharesave scheme before,  however in one of my old jobs a colleague made a nice sum of money through it .... share price was fixed in around $2 at time of joining the scheme,  at the end of the 3 years they were valued at almost $10..... he was putting the maximum he could every month,   and at end of scheme he sold his shares via a broker with a tidy profit.

however,  this doesn't happen for everyone.   but at the end of the scheme if the share value falls you don't have to activate the option to purchase and you get money back and usually with a bit of interest.

in my case though, i never planned to stay in the company that long which was a reason i never joined it.

with regards to the other part of your question,  i would suggest they get both a S&S ISA, and a SIPP too.  but i do know what you mean,  most people just aren't interested in talking about pensions.   but they will be interested when they get to 60 and realise it's too late.

cloud_dog

SAYE schemes are one of the very few (only?) vehicles tou can use to expose yourself to equity risk with virtually zero risk, e.g. the very worst that will happen to you is that you get your money back.