If you’re an employee of a listed company you may be aware, or even be already taking advantage of, Sharesave. Giving employees a chance to purchase shares in the company is nothing new and Sharesave, having been around since 1980, offers members an opportunity to benefit from their company’s fortune.
They are very popular with over 14,000 companies offering such schemes as of 2018/19 holding around £1.63bn of options.
Employees to commit to saving a fixed amount of their choice (usually between £5-£500 per month) for 3-5 years. These savings are then used to purchase shares in the company at an agreed discount (called the ‘Option Price’)– usually around 20%. The money is then taken from your payslip net on every payday.
Because the price you can buy shares at is guaranteed and discounted, even if the share price remains stable, you could be due a good return. If the share price goes up, these returns can be significant.
In 2014, Whitbread employees celebrated a £6m payout after their plans matured. The option price in the 5-year scheme was £7.28– and with the share price at £37.50 on maturity, some members received nearly £70,000. In 2020, ASDA employees would have pocketed over £14,000 for saving the maximum £350 per month – a rise of 107%.
I have seen this firsthand a number of years ago in my previous company before I began working for Three Counties. There the option price was 47p at one point and the price on maturity reached over £2. This helped some of my colleagues achieve large gains and at least one person sought early retirement.
In today’s low-interest environment many are looking for other choices for where to put their money. With Sharesave, the savings are ‘safe’ in the sense that if you do not wish to purchase shares at maturity you can simply take your money that has been set aside. You can also pause contributions or cancel and withdraw all savings.
Your employer should let you know your options at maturity such as exercising the purchase and selling immediately or holding the shares or even transferring them to a spouse. It is also possible to transfer the shares to an ISA. It is usually not advisable to retain shares as this will potentially lead you to be too concentrated into one single holding. And if the company should falter you may potentially suffer the double whammy of losing your job and the value of the shares.
Some helpful links on this subject include:
- Sharesave: what’s not to like? | Financial Times (ft.com)
- Sharesave Approaches Fifth Decade, it Remains As Popular As Ever. (equiniti.com)
- ‘I get £150 extra each month’: The benefits of company share schemes (inews.co.uk)
Although Three Counties wouldn’t usually advise on any individual shareholdings or Sharesave schemes you have, they could be a useful component for your long-term financial planning. Definitely mention this and any other holdings you have when you meet with us.
Please Note: Three Counties Ltd do not take responsibility for the content and accuracy of external links. This article should not be regarded as financial advice and is for information purposes only.
Writer Bio: Nick Cranston is a Trainee Financial Adviser at Three Counties ltd joining the team in December 2021. He passed the necessary industry diploma in August 2021.