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  • FIRST POST
    • mossmanian
    • By mossmanian 14th Sep 18, 8:07 AM
    • 12Posts
    • 4Thanks
    mossmanian
    Company Share Save Scheme - 20% Discount price
    • #1
    • 14th Sep 18, 8:07 AM
    Company Share Save Scheme - 20% Discount price 14th Sep 18 at 8:07 AM
    Hi all,

    I need some help on working out potential returns if I were to join a company share save scheme.

    (I'm already in one company scheme where you buy shares each month at current share price, and for every one you buy, they give you two free, up to a max 40 per month employee purchase)

    This second one is called a Save As You Earn, and the company offer 3 or 5 year plans.

    They offer you shares for the duration of the plan at c20% discount of current price. Option price is 3.80, current price as of today is 4.77.

    I am thinking of investing 50 per month into this plan.

    Am I right in thinking

    50 per month at 3.80 per share is 13 (ignoring the left over to simply this)

    Over the course of 5 years, I'd have invested 3,000, and would have bought 789 shares.

    If I sold them (in 5 years) at today's share price, 4.77, I would get 3,765.

    Making a profit of around 765 in 5 years.

    Obvously this is heavily influenced on share price, and our price has been c 3.80 at it's worst and 5.70 at it's highest for the last 5 years.

    For 50 per month for 5 years, c800 doesn't seem like a good return, considering the risk of it going lower and actually losing money.

    Even if the price were to rise to the upper sides of where it has been (5+), I would have made c1100 over my investment in 5 years, c820 per year.

    Any advice on if this is a sound approach or should I do more research and perhaps look at elsewhere if I wish to invest.
    Last edited by mossmanian; 14-09-2018 at 8:13 AM.
Page 1
    • AlexandLauren
    • By AlexandLauren 14th Sep 18, 8:44 AM
    • 102 Posts
    • 61 Thanks
    AlexandLauren
    • #2
    • 14th Sep 18, 8:44 AM
    • #2
    • 14th Sep 18, 8:44 AM
    I had a similar offer for the company i worked for and it also came with the condition that if the share price at the 5yr point had gone below that of which we bought at then we could simply take the cash out, so you couldn't lose any of your money (not the interest you would have made elsewhere)....not sure if we were covered if the company collapsed though?!?!

    As you're drip feeding at 50pm, i did a quick comparison to a 5% regular savers account and 5yrs at 50pm worked out to be 468.32 in interest.... so it seems the share scheme in that sense is pretty good

    You could drip feed the money into a S&S ISA and hope for a bigger return but essentially its all a gamble of how your company will do or how the market plays out.... the only guaranteed one for making a profit at low risk is the regular savers
    • Drp8713
    • By Drp8713 14th Sep 18, 9:11 AM
    • 843 Posts
    • 718 Thanks
    Drp8713
    • #3
    • 14th Sep 18, 9:11 AM
    • #3
    • 14th Sep 18, 9:11 AM
    For 50 per month for 5 years, c800 doesn't seem like a good return, considering the risk of it going lower and actually losing money.
    Originally posted by mossmanian
    If the share price fell below the option price, you just wouldnt exercise your option to buy and get the cash back instead.

    50 a month at 5% for 5 years would get you a 400 profit.

    You get a 4% a year profit even if the share price doesnt increase because of the 20% discount.

    Seems like a no brainer to me.
    • mossmanian
    • By mossmanian 14th Sep 18, 9:31 AM
    • 12 Posts
    • 4 Thanks
    mossmanian
    • #4
    • 14th Sep 18, 9:31 AM
    • #4
    • 14th Sep 18, 9:31 AM
    Thanks both, I hadn't thought of that, is the price drops below the option buy price, then I just hold onto them until it goes above, and then sell, if I wish.

    Thanks for your validation and assistance in comparative options, I shall look to sign up.
    • Shashy
    • By Shashy 14th Sep 18, 10:04 AM
    • 105 Posts
    • 131 Thanks
    Shashy
    • #5
    • 14th Sep 18, 10:04 AM
    • #5
    • 14th Sep 18, 10:04 AM
    Thanks both, I hadn't thought of that, is the price drops below the option buy price, then I just hold onto them until it goes above, and then sell, if I wish.
    Originally posted by mossmanian
    No no no.

    Your money isn't buying shares each and every month; it is held as cash until the option date, at which point you can either buy shares at the option price or take the cash back. There's no waiting for share prices to return to previous levels - if the share price on the option day is lower than the option price, then you simply take the cash.
    • MallyGirl
    • By MallyGirl 14th Sep 18, 11:10 AM
    • 3,052 Posts
    • 8,081 Thanks
    MallyGirl
    • #6
    • 14th Sep 18, 11:10 AM
    • #6
    • 14th Sep 18, 11:10 AM
    Sharesave schemes are generally a good thing. You don't miss the money going straight out of your pay, you have great potential for growth as even if the shares are pretty static then you have got the 20% discount, there is no loss of capital as you can just take the cash if the share price is below the option price at maturity (although you would have lost out on any savings interest you might have made).
    I go for the max our company allows (250 pcm) - for the last ones I made enough gain to have to get clever with capital gains tax. 1 year in this time round and share price is 45% up on option price so fingers crossed.
    If you do this then sell the shares on maturity as you don't want a big equity holding in the company that pays your wages - too many eggs in one basket if it all goes belly up.
    • Novice investor101
    • By Novice investor101 14th Sep 18, 11:22 AM
    • 252 Posts
    • 412 Thanks
    Novice investor101
    • #7
    • 14th Sep 18, 11:22 AM
    • #7
    • 14th Sep 18, 11:22 AM
    I am in a similar scheme at my work This is a brief run down of how it works.

    You have 50 pm deducted from your post tax pay & this is held as cash. Over the 5 years your 50's add up to 3000.

    At the 5 year point you'll have 3000 saved & will need to make one of 3 choices:

    1) Use the 3000 cash to buy shares at 3.80 & keep them (regardless of what actual share price is on that date).

    2) use the 3000 to buy shares at 3.80 & sell them straight away at whatever the share price is on that date (ie if it's 5 a share in 5 years you but at 3.80 and then immediately sell at 5 & take your 3000 cash plus any profit from the share price being higher than 3.80).

    3) if the share price is either 3.80 or less at the 5 year point, you can just take your 3000 back as cash.

    There's not really any risk involved in terms of losing your 3000 saved, other than the inflationary impact if you have to choose option 3. I use my scheme as a good way to save for a new kitchen in 5 years time!
    • mossmanian
    • By mossmanian 14th Sep 18, 1:43 PM
    • 12 Posts
    • 4 Thanks
    mossmanian
    • #8
    • 14th Sep 18, 1:43 PM
    • #8
    • 14th Sep 18, 1:43 PM
    Ah, that makes sense, I presumed I was buying monthly. Thanks for your help, I've joined the scheme at 75 per month.
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