Discussion
I have been offered a company share offer scheme, sounds like a good idea, and think I will go for it. Has anyone had any bad experiances or advice/points that I might have missed regarding these share schemes.
Details:
Buy shares at £1.67 (20% discount to public) ie £2 to the public.
Take out £5-250 per month for 3,5 or 7 years.
At the end I can take the saved money + 1.8x monthly payment (not much) or I can buy shares at £1.67
Thing is, the price of shares could have gone up quite a bit, which would be great, however the share price might fall and I would have been better saving the money and gaining interest in a bank.
share prices started at £2.25 and have been as low as £1.85
Thanks in advance
Details:
Buy shares at £1.67 (20% discount to public) ie £2 to the public.
Take out £5-250 per month for 3,5 or 7 years.
At the end I can take the saved money + 1.8x monthly payment (not much) or I can buy shares at £1.67
Thing is, the price of shares could have gone up quite a bit, which would be great, however the share price might fall and I would have been better saving the money and gaining interest in a bank.
share prices started at £2.25 and have been as low as £1.85
Thanks in advance
Thing is, the price of shares could have gone up quite a bit, which would be great, however the share price might fall and I would have been better saving the money and gaining interest in a bank.
It looks as though you answered your own question! The price range you quote does not represent the possible range of values when your share option scheme matures!
In short, if it was me, I would do it as long as your company has a reasonable chance of succeeding.
As described, it seems to be a share purchase scheme as opposed to a share option scheme (has elements of an option scheme tho'). The scheme is not familiar to me, but the essence of it is to limit the downside since you can elect to take what you've put in as cash (+ a little bit); maybe not as good as investing it elsewhere but interest rates are pretty low right now. The upside is that the shares may go up in value, and at the moment there is a lot of room for upward movement- I presume this is a listed company and there is a market for the shares.
At this level of investment, the returns are unlikely to be life changing, even at 10x, but it coould be fun & better than a deposit account.
As described, it seems to be a share purchase scheme as opposed to a share option scheme (has elements of an option scheme tho'). The scheme is not familiar to me, but the essence of it is to limit the downside since you can elect to take what you've put in as cash (+ a little bit); maybe not as good as investing it elsewhere but interest rates are pretty low right now. The upside is that the shares may go up in value, and at the moment there is a lot of room for upward movement- I presume this is a listed company and there is a market for the shares.
At this level of investment, the returns are unlikely to be life changing, even at 10x, but it coould be fun & better than a deposit account.
In my experience there is usually an option to take the money at an interest rate better than you would get in the bank. I have always looked on it as a usefull savings scheme with the option that the shares could be worth more than the interest payment.
If there is no cash option, then it depends on your view of risk and where the company will be in 3-5 years time. Also do you intend to be with the company in 3 years time as there is normally a clause about not getting shares before 3 years.
You may never get rich enough to buy a decent cerbera if you don't take risks but remember, only put into shares/investments what you can afford to lose.
Bob
If there is no cash option, then it depends on your view of risk and where the company will be in 3-5 years time. Also do you intend to be with the company in 3 years time as there is normally a clause about not getting shares before 3 years.
You may never get rich enough to buy a decent cerbera if you don't take risks but remember, only put into shares/investments what you can afford to lose.
Bob
The profit margins in the company are getting smaller, infact, they are in this type of business in general. However, that doesn't mean that the profits are not increasing. The company has recently been up graded, but with teething problems, lost quite a bit of custom. That should pick up, and the market is becoming more diverse.
Your right about the cerb, tink I will go for it.
Cheers guys
Your right about the cerb, tink I will go for it.
Cheers guys
As I understand the details of your scheme (correct me if I'm having a senior moment) you commit to buy a given value of shares per month at £1.67 per share. At 3, 5, or 7 years you are guaranteed the value paid into the scheme in cash plus a small additional sum, or you can purchase the 'saved shares' ? So you are (assuming the scheme doesn't fail) guaranteed to retain at least what you've paid in.
If the above is correct then this seems a good deal. You are betting on company growth from a position where you are,presumably, reasonably able to assess that the company is in good health. You are committing the money, but only as you would into a share based guaranteed bond (which is effectively what you're buying.)
The risks are twofold, one, not making what you would by putting the money into the bank - not a major problem with interest rates at their present low ebb, and their only likely to increase slowly, and two, the directors of the firm bu66ering off with the money (a la Robert Maxwell) - you need to ascertain that the fund is being run by an independent party, without the possibility of this happening.
If you are certain that the company is on a reasonably sound financial footing (and reasonable tends to be as good as it gets ATM) and that the scheme is being professionally managed then go for it, the likely gains make it a pretty good gamble.
If the above is correct then this seems a good deal. You are betting on company growth from a position where you are,presumably, reasonably able to assess that the company is in good health. You are committing the money, but only as you would into a share based guaranteed bond (which is effectively what you're buying.)
The risks are twofold, one, not making what you would by putting the money into the bank - not a major problem with interest rates at their present low ebb, and their only likely to increase slowly, and two, the directors of the firm bu66ering off with the money (a la Robert Maxwell) - you need to ascertain that the fund is being run by an independent party, without the possibility of this happening.
If you are certain that the company is on a reasonably sound financial footing (and reasonable tends to be as good as it gets ATM) and that the scheme is being professionally managed then go for it, the likely gains make it a pretty good gamble.
ITs a win win win thang, done a few over a few yrs with Eastern electricity when they privatised and then got taken over and have also done one with a family member who works for BT.
IMHO you should try and do the maximum and if they dont look to good then take the money with u bonus payments Tax free.
BB
IMHO you should try and do the maximum and if they dont look to good then take the money with u bonus payments Tax free.
BB
mrsd said: As I understand the details of your scheme (correct me if I'm having a senior moment) you commit to buy a given value of shares per month at £1.67 per share. At 3, 5, or 7 years you are guaranteed the value paid into the scheme in cash plus a small additional sum, or you can purchase the 'saved shares' ?
Yep, thats basicly what it is.
(assuming the scheme doesn't fail)
ah, so how would it fail? Only if the company goes bust? Or can other things make it fail
The risks are twofold, two, the directors of the firm bu66ering off with the money
They directors already got a stupid pay bonus (millions) so I doubt they are greedy enough to take more
Clearly when purchasing stock in your own firm you are in the unique position of knowing more than the overall market as to its ability to generate long term cashflows and hence realise growth in its share price. However, I would warn against such risk concentration unless you have broad diversification in your overall portfolio of investments. Remember - you already have significant exposure to the performance of your firm - its called your job. If your pension is also tied to your firm, I would not suggest that you further concentrate your dependence on the firm's performance, but instead look to alternative investments with risk/return profiles that suit your needs.
I'm not saying that these kind of share-schemes are bad - just that they sould be considered as part of a bigger picture.
I'm not saying that these kind of share-schemes are bad - just that they sould be considered as part of a bigger picture.
I had this when i was working for tesco. ended up saving 250 a month for 5 years.
employee share price was 75p
over the 5 year got 20000 Shares
Now work 187 pence each hence 37400 pounds of shares for 15000 pounds..
just depends on the position of your company and if you have a good feeling if the share price will rise.. just waiting for another 18months then i can sell tax free. then i will be getting a new T350C....
Thats my experience
hope it help
steve
employee share price was 75p
over the 5 year got 20000 Shares
Now work 187 pence each hence 37400 pounds of shares for 15000 pounds..
just depends on the position of your company and if you have a good feeling if the share price will rise.. just waiting for another 18months then i can sell tax free. then i will be getting a new T350C....
Thats my experience
hope it help
steve
Possible modes of failure are:
-Pension fund loses money, your fund raided to prop it up.
-Company loses money, your fund raided to prop it up.
-Fund is mismanaged and there isn't enough in the pot to pay out what is supposedly secure (this should be insured against and will be if the fund manager is competent)
-Directors fall out, nick the money, disappear off the face of the earth (it happens
)
If your pension is tied to the firm it might be sensible to steer clear. The problem is not, particularly, the directors bu66ering off to the Bahamas (probably fairly unlikely) but rather that the firm begins to slide and the fund you have invested in is raided to help it survive (not as unlikely as you'd like to hope.) That is why it is essential that you establish that it is externally managed.
-Pension fund loses money, your fund raided to prop it up.
-Company loses money, your fund raided to prop it up.
-Fund is mismanaged and there isn't enough in the pot to pay out what is supposedly secure (this should be insured against and will be if the fund manager is competent)
-Directors fall out, nick the money, disappear off the face of the earth (it happens
)
paul said:If your pension is also tied to your firm, I would not suggest that you further concentrate your dependence on the firm's performance, but instead look to alternative investments with risk/return profiles that suit your needs.
If your pension is tied to the firm it might be sensible to steer clear. The problem is not, particularly, the directors bu66ering off to the Bahamas (probably fairly unlikely) but rather that the firm begins to slide and the fund you have invested in is raided to help it survive (not as unlikely as you'd like to hope.) That is why it is essential that you establish that it is externally managed.
mrsd said: Possible modes of failure are:
-Pension fund loses money, your fund raided to prop it up.
-Company loses money, your fund raided to prop it up.
-Fund is mismanaged and there isn't enough in the pot to pay out what is supposedly secure (this should be insured against and will be if the fund manager is competent)
-Directors fall out, nick the money, disappear off the face of the earth (it happens
paul said:If your pension is also tied to your firm, I would not suggest that you further concentrate your dependence on the firm's performance, but instead look to alternative investments with risk/return profiles that suit your needs.
Usually these schemes are run as a seperate entity with a bank (or similar) running the scheme. You will only lose money if the bank fails !
Bob
Also with some schemes as l understand, if you take the cash at the end of the scheme because there share price is low, your option to buy continues for another 6 months so if the share price shoots up after you have taken the cash in this period you can exercise your option (providing you haven't spent it in the meantime!)
Sounds safe and straightforward. Probably worth getting an IFA or an accountant to check your position, but sounds pretty good to me.
I am not a qualified IFA or accountant, everything I say should be taken purely as my personal opinion, the value of shares may go up or down, don't feed them after midnight, don't sue me if it all goes wrong
I am not a qualified IFA or accountant, everything I say should be taken purely as my personal opinion, the value of shares may go up or down, don't feed them after midnight, don't sue me if it all goes wrong
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