Employee Share Purchase Scheme - Share Dunce Here!
Discussion
So, I have been offered to join the companies Employee Share Purchase Scheme.
We are offered shares at 15% of the FMV purchased between 2-15% of our post tax salary over a 6 month period. Our shares are purchased at %15 below the lowest asking price over that 6 month period.
So, so far so good i understand this. I can afford the 10% option from my salary.
But i know practically nothing about shares, how they work and how you are (allegedly) supposed to make money from them.
So PH investors, am i being offered a good deal in terms of price? What happens when i decide i want to cash out? How does this affect my tax etc?
All advice appreciated!
We are offered shares at 15% of the FMV purchased between 2-15% of our post tax salary over a 6 month period. Our shares are purchased at %15 below the lowest asking price over that 6 month period.
So, so far so good i understand this. I can afford the 10% option from my salary.
But i know practically nothing about shares, how they work and how you are (allegedly) supposed to make money from them.
So PH investors, am i being offered a good deal in terms of price? What happens when i decide i want to cash out? How does this affect my tax etc?
All advice appreciated!
You are being offered shares at a discount to market. But a company's share price can go up or down by more than 15%. So I guess ultimately you need to be confident that your employers share price will go up if you hold the shares for a number of years. Meaning they are doing well, growing, increasing profits etc... But if you are confident you shouldn't be. See below.
What I will say is that you may not be able to guess correctly even if you think you know the company well. Share prices do strange things. A company can announce a loss and it's price can rise sharply. Because the market was expecting worse. Or vice verse. Individual investors operate with a lack of this 'market expectation' knowledge and we also hear information way too late to act on it. The pro's have already bought or sold or whatever.
Clear example this week, ASOS had a fire at their main warehouse. General consensus (amount private investers) was that the shares would plunge on Monday. They did fall modestly. A few percent. Then ended up higher than on the Friday before the fire! Because the stock lost was insured. They had insurance against loss of business. And seemed to have good plans in place after their experience with the Bunsfield fire some years ago. So they shrugged it off. Good for them. But many private investors probably bailed and lost out. Many perhaps sold at 2660p early yesterday morning. The shares closed today at 2888p.
Where am I going with this? I guess it's basically don't assume you role will give you any advantage in terms of gauging your employers future prospects. Because the market has already decided how well your employer should be doing in three years or more and today's price is set accordingly. So even if your employer is medium sized and doubles in size, your shares may not? Also make sure you don't have to keep the shares for a long time before you can sell them. And also plan to keep the shares a long time in case they drop and take a while to recover to their previous level.
If those last two sentences sound bizarrely contradictory ... they are! I am trying to put you off :-). Feel free to disregard. A lot depends on which shares you are talking about?
What I will say is that you may not be able to guess correctly even if you think you know the company well. Share prices do strange things. A company can announce a loss and it's price can rise sharply. Because the market was expecting worse. Or vice verse. Individual investors operate with a lack of this 'market expectation' knowledge and we also hear information way too late to act on it. The pro's have already bought or sold or whatever.
Clear example this week, ASOS had a fire at their main warehouse. General consensus (amount private investers) was that the shares would plunge on Monday. They did fall modestly. A few percent. Then ended up higher than on the Friday before the fire! Because the stock lost was insured. They had insurance against loss of business. And seemed to have good plans in place after their experience with the Bunsfield fire some years ago. So they shrugged it off. Good for them. But many private investors probably bailed and lost out. Many perhaps sold at 2660p early yesterday morning. The shares closed today at 2888p.
Where am I going with this? I guess it's basically don't assume you role will give you any advantage in terms of gauging your employers future prospects. Because the market has already decided how well your employer should be doing in three years or more and today's price is set accordingly. So even if your employer is medium sized and doubles in size, your shares may not? Also make sure you don't have to keep the shares for a long time before you can sell them. And also plan to keep the shares a long time in case they drop and take a while to recover to their previous level.
If those last two sentences sound bizarrely contradictory ... they are! I am trying to put you off :-). Feel free to disregard. A lot depends on which shares you are talking about?
RichS said:
As well as the 15% discount is it also tax effectve? That would also be worth taking into account. My shares are bought out of Pre-taxed earnings and for every one I buy, I get one free. Given I pay 45% tax, it's effectively buy one, get 2 free.
We've got this share match scheme at work too. But you have to hold the shares for 3 years or you forfeit the BOGOF ones! and as you get them pre-tax you have to hold them 5 years or when you do sell them you have to pay tax & NI on them.It's also limited to £1800 a year at our place. But you get dividends straight away. So if long term, 5 years, you know you'll still be there and can afford it, it's ALMOST a no brainer, as it's near on 70% off in total.
We also have another scheme which is slightly different than the OP, sharesave, you 'save' to buy shares at a set price at the start of the scheme which is 20% below market value. At the end of the scheme which is either 3 or 5 years, the shares are purchased for you, at the original option price. So if the current price is above the option price you're up. If the price is below you can just take all your money back. Tax free, as the original deductions are taking from salary after tax. Risk Free. If they should fall the only thing you'd miss out on is the interest your money would earn in the bank over the period. Once you own the shares you can sell as and when you wish. So you can hold out longer if hour confident of further market improvements.
*Badger* said:
We've got this share match scheme at work too. But you have to hold the shares for 3 years or you forfeit the BOGOF ones! and as you get them pre-tax you have to hold them 5 years or when you do sell them you have to pay tax & NI on them.
It's also limited to £1800 a year at our place. But you get dividends straight away. So if long term, 5 years, you know you'll still be there and can afford it, it's ALMOST a no brainer, as it's near on 70% off in total.
We also have another scheme which is slightly different than the OP, sharesave, you 'save' to buy shares at a set price at the start of the scheme which is 20% below market value. At the end of the scheme which is either 3 or 5 years, the shares are purchased for you, at the original option price. So if the current price is above the option price you're up. If the price is below you can just take all your money back. Tax free, as the original deductions are taking from salary after tax. Risk Free. If they should fall the only thing you'd miss out on is the interest your money would earn in the bank over the period. Once you own the shares you can sell as and when you wish. So you can hold out longer if hour confident of further market improvements.
Yes to be fair there is a minimum hold on mine too, plus a further restriction on the BOGOF ones. But I think you also get cashed out basically if you're a good leaver, so even if they fire you, you get full value (unless eg you've had your hand in the till). It's also limited to £1800 a year at our place. But you get dividends straight away. So if long term, 5 years, you know you'll still be there and can afford it, it's ALMOST a no brainer, as it's near on 70% off in total.
We also have another scheme which is slightly different than the OP, sharesave, you 'save' to buy shares at a set price at the start of the scheme which is 20% below market value. At the end of the scheme which is either 3 or 5 years, the shares are purchased for you, at the original option price. So if the current price is above the option price you're up. If the price is below you can just take all your money back. Tax free, as the original deductions are taking from salary after tax. Risk Free. If they should fall the only thing you'd miss out on is the interest your money would earn in the bank over the period. Once you own the shares you can sell as and when you wish. So you can hold out longer if hour confident of further market improvements.
RichS said:
Yes to be fair there is a minimum hold on mine too, plus a further restriction on the BOGOF ones. But I think you also get cashed out basically if you're a good leaver, so even if they fire you, you get full value (unless eg you've had your hand in the till).
You're only a good leaver on our scheme if your made redundant or die.If you leave of your own accord or are sacked, your a bad leaver and subsequently forefit your BOGOF shares.
Ok thanks for the advice everyone. They are a good company and looking at the trend of the share price it is on the up year on year for the last 5 years. We aren't tied in for how long we hold onto them beyond the 6 month buy in scheme. I think i am going to dabble with 5% i can afford to loose that and you never know i might even make my money back when i chose to sell them 
*Badger* said:
You're only a good leaver on our scheme if your made redundant or die.
If you leave of your own accord or are sacked, you're a bad leaver and subsequently forefit your BOGOF shares.
I think I work for the same company If you leave of your own accord or are sacked, you're a bad leaver and subsequently forefit your BOGOF shares.
I am taking a punt on the share match scheme, and also the saving scheme. The last one worked out quite well as I did the full amount. Any discount that you'd get is most likely to outperform any savings with the current rates available, especially if there are tax breaks too. Our scheme is an Aesop scheme, so tax relief on up to £150 a month. We can put up to 6% of salary in, for every £1 we put in the company puts another 50p. Shares are bought every month with your contribution. Usual tax rules apply. Our additional 50p over £1 from the company has no restrictions.
I worked here for 11 years before and did very well from the scheme. Back 2 years and already my 5k in is worth 10k with company contribution and growth and dividends.
I'm always amazed that some colleagues aren't putting the maximum allowed in.
I worked here for 11 years before and did very well from the scheme. Back 2 years and already my 5k in is worth 10k with company contribution and growth and dividends.
I'm always amazed that some colleagues aren't putting the maximum allowed in.
scottri said:
It doesn't always end very well though, i have only just broken even a couple of times on these sorts of schemes due to factors outside of my control i.e. company got taken over.
Having said that i'm currently in two schemes like this.... 3rd time lucky maybe!
Depends on the company your right, luckily the company I work for is in the fortune top 50 in the US Having said that i'm currently in two schemes like this.... 3rd time lucky maybe!
geeks said:
Ok thanks for the advice everyone. They are a good company and looking at the trend of the share price it is on the up year on year for the last 5 years. We aren't tied in for how long we hold onto them beyond the 6 month buy in scheme. I think i am going to dabble with 5% i can afford to loose that and you never know i might even make my money back when i chose to sell them
Salesforce.com ? If so PM me and I can give you some info.After 4pm today I'll be out the loop as off to Le Mans for the Classic, back Monday.
Office_Monkey said:
I think I work for the same company I am taking a punt on the share match scheme, and also the saving scheme. The last one worked out quite well as I did the full amount. Any discount that you'd get is most likely to outperform any savings with the current rates available, especially if there are tax breaks too.
Maybe we do... This is my first punt at both schemes. I'm all in Sharematch in July using my full allocation, better to do it that way if you can afford rather than monthly, otherwise in 5 years time you'll only have one months to sell versus one years contributions. I am taking a punt on the share match scheme, and also the saving scheme. The last one worked out quite well as I did the full amount. Any discount that you'd get is most likely to outperform any savings with the current rates available, especially if there are tax breaks too. Gassing Station | Finance | Top of Page | What's New | My Stuff