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SAYE


kibuc
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My employer is an AIM-listed company and as such participates in Save As You Earn programme. What do you guys think about those?

There's a lot I like about what I've read so far, almost to the pont of being "too good to be true". Here's what I've gathered so far from my employer's FAQ and HRMC pages.

1. I can get into a 3-year programme where I would be purchasing options for shares in my company monthly, for up to £500 of my post-tax earnings, at a fixed price that's at 29% discount to its today's market price.

2. After those 3 years, if I'm in the red, I can simply not exercise the options and get all my investment back (so I only have to bear the opportunity cost).

3. If I decide to exercise my options and sell, I pay CGT on any gains.

4. I can also exercise my options and transfer to my ISA or SIPP (I assume normal annual limits still apply), avoiding the CGT completely.

5. The plan is offered every autumn, each time with a strike price of current market price (I think it's an average price over October) minus 20%. I can join every year, as long as my total contributions don't exceed £500/month.

6. I can opt-out at any time and get my investment back.

 

Adding 5 and 6 together, it seems like I can opt in this year for the full amount and if the options are cheaper next year, I can simply opt-out from the current one and start over with the new one at a cheaper price, only losing 1 year's worth of opportunity cost. 

 

Even if I take into account that my industry (online fashion retail) might suffer in an inflationary environment, this still looks very very juicy. What am I missing here? What do you guys think?

Edited by kibuc
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You aren't missing anything - SAYE schemes are great deals with little downside - which is why companies like to offer them. 

 

My one comment would be you transfer them into a ISA if you don't cash them in. Never put things bought with taxed income into a SIPP or pension fund.

Edited by eek
  • Agree 1
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ILikeCake

It's a good perk.

I've done it twice with a previous employer.  First time when I left the shares had increased in value slightly and I sold them for a small profit.  Second time the shares started to drop well below the offer price and there was rumours of the company going bust so I just claimed back the money I had paid in (was a good move in the end as the company went into administration eventually).

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If it's the company I think it is (starts with A), then I'd probably be buying shares in them anyway on the side. Their shares seem to perform quite poorly considering their market size etc.

Never really understood why that is, they are one of the British success stories and have positive cashflow.

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Do you have to pay Benefit in Kind tax on the amount of discount when you purchase? Either way still sounds decent. 


I had similar although it was a US company so not SAYE but with a 7.5% discount on the lower of two share prices at start and end of 6 month period. Stopped it eventually as I’d bought enough and was post-tax but still decent. 

Edited by mh9000
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Ericthethird

Agree best to max SAYE IF you can as very little downside as I can see. Done a few of these at my work over the years. Withdrew one after a year to go for the cheaper one as it was down 20%, but stock price fell about 20% in years 3 to 4 so came out equal. Sometimes you can try and be too clever I suppose.

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