Sainsburys Sharesave 2018 - Worth doing?

Daii · 12 November 2018 at 3:00PM

I have the option to invest in the Sainsbury's Sharesave 2018 plan, and was just wondering if it was a worthwhile investment:

You can save up to £250 a month (after youve been taxed on your main wage) with it, and at the end of either 2 or 3 years, you have the option of buying Sainsburys shares at a 20% discount.*

At the end of the term, you can sell these shares straight away if they are worth more than what you have invested. If the shareprice is lower, then you just get back what you have saved, therefore do not lose money.

*The 20% discounted price for Sharesave 2018 is £2.60, which was set as at 8th November 2018.

Is this a good deal, or are there better ways to invest the money? Thanks.

Dorian1958 · 12 November 2018 at 3:09PM

That's an impossible question to answer without knowing a lot more about your other financial circumstances, attitude to risk etc. Personally, in the absence of any other investments I would not be putting money into an individual share. You would be losing money if the price is lower than what you paid - you have lost the opportunity value of the lost interest you might otherwise have had, and the cost of inflation.

msallen · 12 November 2018 at 3:44PM

You've said it yourself. You either get to buy the shares at a discount (and then immediately sell to either reap the profits or else invest in something a little more balanced), or you get your money back.

Assuming you can afford to tie the cash up for the duration of the scheme its a no brainer.

Aegis · 12 November 2018 at 4:04PM

I always tell people to put money into their sharesave scheme if they have one. You get options rather than shares, which means you aren't linked to the loss if the shares fall in value. You do sacrifice some interest compared with putting money into a regular saver, but I generally think it's worth losing that for the benefit of exposure to a potentially rising share price.

Of course, if you think the share price has nowhere to go but down, then you might want to reconsider and just take that interest instead.

george4064 · 12 November 2018 at 5:22PM

If you can afford to set aside some money a month, I would say its most definitely worth it.

By the way, what you have available is a share option. The only risk is that the share price declines so that it is not worth taking the option and you get your money back, but that you wouldn't have earnt any interest on that money over the period.

Herbalus · 12 November 2018 at 7:08PM

It is identical to the scheme at my workplace. I'm in for 3 years.

The view I have is that you will make money if the share price does not drop below 20% of the existing option price.

To put the options into another perspective, putting say £100 a month into a savings account for 3 years at 1.5% would give you £83 interest in total. Compare this to the gain of £720 if the share price did absolutely nothing over 3 years and you gain 20% of the £3600 you saved.

bowlhead99 · 12 November 2018 at 7:44PM

Herbalus wrote: »

To put the options into another perspective, putting say £100 a month into a savings account for 3 years at 1.5% would give you £83 interest in total. Compare this to the gain of £720 if the share price did absolutely nothing over 3 years and you gain 20% of the £3600 you saved.

The scheme offers a 20% discount which is a 25% profit on purchase price.

In your example, if the share price did absolutely nothing you would spend your saved £3,600 on buying shares at a 20% discount to their full market price, and be able to sell them at their full market price which is £4500. That's a £900 profit rather than a £720 profit.

To prove the maths, imagine being able to buy a pound coin at 20% discount (80p a coin). Spend £3600 on those coins at 80p each and you'll have 4500 pound coins to take to your bank.

To the OP, I would recommend the deal if you can spare the £250 a month. If markets are down you miss out on some small amount of bank interest that you could have made. If markets are flat you make a massive gain. If markets are up you make a massiver gain. It's a very limited-risk, one way bet, with the risk just being missing out on what other things you could have done with the money, none of which are as potentially lucrative for the same level of risk.

Another way of looking at it is that the government doesn't allow people to put as much as £1000pm into an employer scheme because it would be an outrageously cheeky way for the employer to give the employees a great benefit with minimal tax. They are letting you play a game where heads you win, tails you can't lose much. So, when offered these things, take them, if your finances allow.

greendoor665 · 12 November 2018 at 8:08PM

Do it. They are well worth it. Although it's true investing in a single share is riskier than the market, the fact that you start off with a 25% profit more than makes up for it.

Although there is an opportunity cost of the share price falls below the option price, the potential is there to make big gains.

This is anecdotal evidence, but I cashed out my first sharesave last year with a big gain. To earn the same return in a regular saver bank account I'd have to been earning 36% interest! That shows you what the power of the discount plus a bull market can do.

MallyGirl · 12 November 2018 at 8:34PM

My first sharesave I invested the full £250 pcm for 3 years so £9k. After 3 years they were worth £23k so had to learn about capital gains tax - a nice problem to deal with (by transferring a few shares to DH). The current lot are at 36% above option price (same 20% discount setup) after just over a year. A lot could happen in the next 2 years but interest rates are rubbish right now and I don't miss the money as it is deducted from my pay. The worst that happens is I get my £9k back and have missed out on a bit of interest. I would put more in if they let me - HMRC allows more than £250pcm these days but the company is sticking there.

ruperts · 12 November 2018 at 10:56PM

In terms of risk:reward ratio, sharesave schemes like that have got to be one of the best financial products available. In fact, I can't really think of anything better.

One thing to consider is if they offer it every year, the £250 is probably an overall rather than individual scheme allowance, so if you think you might want to participate every year then save some of the allowance for next year (or for the next two years if you take the 3 year option). That way you'll have share options maturing every year.

Shashy · 13 November 2018 at 9:46AM

Dorian1958 wrote: »

You would be losing money if the price is lower than what you paid - you have lost the opportunity value of the lost interest you might otherwise have had, and the cost of inflation.

I assume this post misunderstands how Sharesave schemes work. Your cash is held as cash until the option date - the absolute maximum loss you can make is the lost interest, which is shown in earlier posts to be minimal anyway vs the gain opportunity if the share price were to do nothing at all.

The point around 'if the price is lower than what you paid' makes no sense in this context.

Sainsburys Sharesave 2018 - Worth doing?

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