Sharesave scheme-advice needed

cslogg

My wifes company is running a scheme where she can have an amount taken from her salary each month to invest in company shares.It lasts three years and at the end of it she can choose to convert her money into shares at todays price or take the money which includes a bonus. The example quoted in the leaflet is this::
Monthly payment= £50
Total over three years= £1800
Bonus=£95
Total savings inc.bonus £1895

Is this type of scheme usually a good thing or would it be better to invest eleswhere.
I have not stated her company or the share price she can buy at in three years time but I can put it here if its needed for anyone to give me advice/opinion.

Thanks
cslogg

YorkshireBoy

I contributed to one of these schemes for 11 years from 1989 to 2000 with my previous employer and made a "fortune"! This *easy* income ended with a MASSIVE payout midway through 2000 when the company was sold, taken off the stock market, and taken into (German) private ownership

I'm not familiar with the rules these days but back then our share purchase price was fixed at 20% less than the mid price at the start of each scheme (they ran each year), and there were terms available ranging from 3-7 years. On only one occasion did I take the money - every other year I took the shares and *immediately* sold them (only one wage and 3 young kids to support!).

From memory, your information pack should tell you the equivalent interest rate if you take the money at the end of the term, and this was tax-free as I recall back in the 90's.

The major plus for these schemes (providing the equivalent interest rate is reasonable) is that after a while you simply do not miss the money. I started out with £20 a month in 1989, but within a few years I was contributing the maximum of £250 per month. It's hard to start with, but you soon get used to the reduced net pay in your pay packet.

To sum up, providing the equivalent interest rate is reasonable...

YOU SIMPLY CANNOT LOSE!

Edit: Yorkshire Building Society ran most of my my old sharesave schemes. Below is a link to some "light reading" on the schemes - for both employer and employee...

http://www.ybs.co.uk/shareplans/index.jsp

crankup

Our firm has also ran them for a while. The risk is low as you will at least get back all your money if the share price falls badly. If the company does well then you can gain. If you wanna lock a little money away for a few years regularly then I believe it is a good idea.

:-)

dunstonh

Generally these are no risk ways of investing for stockmarket growth with your employer.

I used to have one of these with a bank when i was younger. Made a fortune out them. I did the 5 year versions and did a bit every year so after 5 years i got a maturity a year.

If the share price doesnt do well, you take the bonus added instead. You cant lose.

ti1980

I have just invested in my employers sharesave scheme.

I did so after speaking to some older employees who have been doing it for years. After having done it for 3 years, they now get a payout every year. Obviously according to people's situations they can invest different amounts but to a couple of people I spoke to, they invested between £50 and £100 per month and they seemed really happy with the returns. They knew they could afford what they put in and it comes out of your wages so they didn't notice it.

I have been told that it is 'easy money' and that you can't lose and the people I spoke to were adamant that as long as this scheme kept on going that they would retire with the company.

You always get your money back and there is the bonus you get as well.

I'll be able to say personally whether it works for me in 2 and a half years!

ddclutch

I think that you will find that the money is "top sliced" off her salary, so that she dosn't pat tax or NIC so long as she keps in the scheme for three years.

cslogg

Well reading the advice here it looks like we should join this scheme.
Thanks for the advice.

I also have another query connected with this.
My wife joined a scheme only three months ago with the same company where they deduct a regular amount each month from her salary and purchase shares for her.
Every two shares she buys the comany will add another one.
She obviously joined this scheme before she knew of the latest one.
My question is....should she pull out of this scheme and invest her money in the one I mentioned earlier or leave it as it is.

cslogg

YorkshireBoy

ddclutch wrote:

I think that you will find that the money is "top sliced" off her salary, so that she dosn't pat tax or NIC so long as she keps in the scheme for three years.

I appreciate you said you "think" but your statement is totally incorrect!

SidB_2

The 2 for 1 scheme looks even better than the sharesave. I've never heard of any similar and wonder about the tax implications.

I'm also in a scheme where I can buy shares free of tax and NI (must keep them for 3 years). I've invested in both schemes as there are slightly different risks involved. With sharesave you are realtively safe. With the other there is greater risk, but the savings are better if you are a higher rate tax payer.

You must consider whether you will still be with the company in three years.

Personally I would invest in both, but I'm a higher rate tax payer, and can afford it.

The second scheme has the advantage that you will begin to get dividends immediately. I believe that you may be able to reinvest these dividends, and not have to pay tax on them, should you wish.

Of course, there is always the risk that the share price will drop.

Al_Mac

I would have said yes to the first scheme, but now you mention the other, which if it is a SIP, the money is taken gross, so theres a 20%+ bonus already, plus free shares, she should chuck money at this one.

YorkshireBoy

cslogg wrote:

My question is....should she pull out of this scheme and invest her money in the one I mentioned earlier or leave it as it is.

The benefits, risks, and tax/NI situation of both sharesave and share incentive plans (SIP) are listed and compared in my link above.