Giving a monthly amount to a friend to save for me in a share scheme - legalities?

artyboy

Daliah said:

fimonkey said:

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

What if the share price crashed and your friend hasn't got enough capital to pay your money back, not to talk about interest?

From the way it was described, this is almost certainly a U.K. Sharesave scheme, where employees can put in up to £500/month for 3 or 5 years, with a discounted option on the share price (of their employer company) up front, plus a guarantee you can get your cash back at the end of the share price has fallen.

If that's the case, then the specific risk you are describing isn't an issue. Plenty of other risks though!

jimjames

artyboy said:

Daliah said:

fimonkey said:

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

What if the share price crashed and your friend hasn't got enough capital to pay your money back, not to talk about interest?

From the way it was described, this is almost certainly a U.K. Sharesave scheme, where employees can put in up to £500/month for 3 or 5 years, with a discounted option on the share price (of their employer company) up front, plus a guarantee you can get your cash back at the end of the share price has fallen.

If the share price has dropped then you've handed over money for 5 years with no return so they wouldn't be paying any interest.

artyboy

jimjames said:

artyboy said:

Daliah said:

fimonkey said:

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

What if the share price crashed and your friend hasn't got enough capital to pay your money back, not to talk about interest?

From the way it was described, this is almost certainly a U.K. Sharesave scheme, where employees can put in up to £500/month for 3 or 5 years, with a discounted option on the share price (of their employer company) up front, plus a guarantee you can get your cash back at the end of the share price has fallen.

If the share price has dropped then you've handed over money for 5 years with no return so they wouldn't be paying any interest.

However in the scenario stated, the friend would have received their part of the investment back as well as the amount that the OP topped it up with. So if there was some sort of agreement drawn up to pay interest to the OP, it's not as though their friend wouldn't have got enough back in aggregate to pay that interest.

But as I said, it's just one risk dealt with out of many others...

jimpwarsop

Five years at £100 a month, £6k.

Lets say the shares double, would you lend your friend £12k ? 

Personally this type of scheme made me thousands (as an employee) they are win/no lose, at the time the max was £250 a month, at times I went without beer :'( to make those payments.

If you trust them then go for it, but be prepared to be disappointed.

jimjames

artyboy said:

jimjames said:

artyboy said:

Daliah said:

fimonkey said:

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

What if the share price crashed and your friend hasn't got enough capital to pay your money back, not to talk about interest?

From the way it was described, this is almost certainly a U.K. Sharesave scheme, where employees can put in up to £500/month for 3 or 5 years, with a discounted option on the share price (of their employer company) up front, plus a guarantee you can get your cash back at the end of the share price has fallen.

If the share price has dropped then you've handed over money for 5 years with no return so they wouldn't be paying any interest.

However in the scenario stated, the friend would have received their part of the investment back as well as the amount that the OP topped it up with. So if there was some sort of agreement drawn up to pay interest to the OP, it's not as though their friend wouldn't have got enough back in aggregate to pay that interest.

But as I said, it's just one risk dealt with out of many others...

Absolutely one risk. If the friend hasn't made any interest (as I understand it the option is shares or return of capital) then they will end up with less money after 5 years than they put in which might not be something they accept. Hopefully if a written agreement made but either way they could pressure OP to accept the same as they've received ie nothing additional.

MrFrugalFever

jimjames said:

artyboy said:

jimjames said:

artyboy said:

Daliah said:

fimonkey said:

However at the end of the term I would expect my money back with a certain amount of interest (to be decided, either CPR, or a set interest amount, or the price the shares increased).

What if the share price crashed and your friend hasn't got enough capital to pay your money back, not to talk about interest?

From the way it was described, this is almost certainly a U.K. Sharesave scheme, where employees can put in up to £500/month for 3 or 5 years, with a discounted option on the share price (of their employer company) up front, plus a guarantee you can get your cash back at the end of the share price has fallen.

If the share price has dropped then you've handed over money for 5 years with no return so they wouldn't be paying any interest.

However in the scenario stated, the friend would have received their part of the investment back as well as the amount that the OP topped it up with. So if there was some sort of agreement drawn up to pay interest to the OP, it's not as though their friend wouldn't have got enough back in aggregate to pay that interest.

But as I said, it's just one risk dealt with out of many others...

Absolutely one risk. If the friend hasn't made any interest (as I understand it the option is shares or return of capital) then they will end up with less money after 5 years than they put in which might not be something they accept. Hopefully if a written agreement made but either way they could pressure OP to accept the same as they've received ie nothing additional.

If this is an employee SAYE scheme then the OP’s friend would only walk away with LESS if they were stupid enough to transact a sale of shares when the share price drops below the purchased share price. Other than this, you simple withdraw and walk away.

The OP would need to know how much the discounted shares were being bought at and calculate what £100pm purchases in total over the 5 years and effectively agree that they get the profit from that quantity of shares at the point in which the transaction to sell is completed (providing the OP’s friend has the sense to sell above purchase share price. 

If this is an SAYE, there’s no immediate requirement to transact and thus they could sit on said shares until such point whereby they increase considerably above purchase price (assumed at 20% HMRC discounted limit).

Millyonare

Sounds like a high-risk, low-reward venture.

As the old saying goes -- never lend money to friends or family. It never ends well.

Ahm oot.

Marcon

fimonkey said:

A good friend has been offered a great company share scheme and they can pay in up to £500 per month for the next 5 years. 

They are a really good friend, I would not expect anything to happen - but who knows what the future holds? 

However good the terms of the share scheme are, iInvesting in just one stock, as opposed to risk spreading, is one of the highest risks of all. Just look at the number of companies which have gone under. How would your friend repay you if that happened and he lost off his job as well as the value of his savings in the share scheme?

MalMonroe

fimonkey said:

A good friend has been offered a great company share scheme and they can pay in up to £500 per month for the next 5 years. After which they can continue with shares, or get their money back, or cash out the shares if they are worth more than their investment.
They can afford £400 pm and have asked me if I want to contribute £100 pm.

If I do this, how can I ensure that in the event of their death, incapacitation, or that our friendship breaks down I at least get my money back? Or is this a risk I just have to take? They do not have a will and nor are they interested in getting one (I know!!!).

Even if I cannot protect myself legally, would an acknowledged email between us setting out the terms and conditions at least give me a leg to stand on with their next of kin if they die? Or if our friendship ended?

They are a really good friend, I would not expect anything to happen - but who knows what the future holds? 

You do need to get some proper legal advice if you decide to go through with this, which I think is a big risk and not worth it.

Personally I would not enter into such an arrangement even with a 'cast iron' agreement in place. 

There is no guarantee whatsoever that you will profit in any way from this venture.

You ask "how can I ensure that in the event of their death, incapacitation, or that our friendship breaks down I at least get my money back? Or is this a risk I just have to take? They do not have a will and nor are they interested in getting one (I know!!!)."

My answer would be : You cannot ensure anything.

"Is this a risk I just have to take?" -

Answer : NO. It isn't a risk you have to take at all. Nobody is forcing you to do anything.

To these two questions "would an acknowledged email between us setting out the terms and conditions at least give me a leg to stand on with their next of kin if they die? Or if our friendship ended?"

I would answer - NO, on both counts.

I've seen posts on this forum where people have trusted 'a really good friend' with their money and none of the outcomes have been good so they have come here to find out how they can recoup their loss. More often than not they can't.

At least you have come here to ask for opinions before you've actually started handing over your money. 

It would really be best for you to find your own way of investing your own money. At the very least - just putting £100 per month away - you'd end up with £6000 after five years. I don't think that's to be sniffed at. Sometimes less can really be more.

refluxer

To those saying these schemes are inherently risky, have the rules changed in recent years ?

When I used to participate in my employer's SAYE share scheme, it was literally a no-brainer. If the share price dropped below the initial offer price, you could take the cash plus they would add a certain number of monthly deposits on top which effectively gave you interest on the money you'd saved. If the share price had risen, then you could take the shares and either keep them, sell them (and make an instant profit) or pay them directly into a S&S ISA to limit any future tax liabilities. 

Saying all that, I still wouldn't participate in a friend's scheme in the way the OP suggested.