Company share scheme V's mortgage overpayments

[C8LNJ]

My company runs 2 share schemes.

1 I participate in as the contributions come off gross salary giving the obvious 40% tax incentive.

The other I don't currently run, as it's a share save scheme with no tax gain. Basically a buy in price over either 3 or 5 years with the option to take the shares (if they increase in value) or take your money back if stock value is below buy in price. There's also a bonus and dividends once the term completes.

I can contribute up to £250 a month for either 3 or 5 years.

Would it make more financial sence to overpay on my mortgage each month?

The stock price has been relatively flat the past few years although 4 yrs ago was valued about 2/3 of current value.

Mortgage overpayments could however save a lot in the long run as well.

I'm thinking mortgage but my old timer colleague although possibly blinkered by the good boom years swears by the shares.

Edited by C8LNJ on Sunday 11th November 22:13

[anonymous-user]

Is your cash protected in either scheme? I.e. if the share price is lower at the end (strike price) when the shares are purchased can you opt to just take the cash?

From what you have written its sounds like this would be the case in the first scheme but not the second?

[C8LNJ]

The 2nd one is no risk, can just walk away with your money at the end if it's taken a dive.

The one I contribute to is more of a risk but pretty much guaranteed to double your money. As your paying 60% of the price thanks to the tax leverage.

[bogie]

depends on your company/industry I guess...thats the gamble

Ive made quite a bit over the years in our scheme at work, by luck mostly, with markets crashing just days before the regular time to buy for the scheme kicked bought

I overpay my mortgage and do 5% of salary into the stock scheme, because im confident of the future of the company, industry etc, and I can always get out of it at short notice if I need to

sounds like yours ties you in a bit more, so you need to consider that too

[C8LNJ]

It's oil industry.

Bonus payment on term I found out is 9 months contributions over 5yrs.


Think I might just do a bit of both.

[fandango_c]

The second scheme has may have tax advantages on the amount that you save, and hence may give similar returns to overpaying your mortgage. Except that the second scheme has the benefit of a gain if the share price is above the option price at the end of the term of the scheme.

The option price may be set at a discount to the share price at the start of the scheme.

[ellroy]

fandango_c said:

The option price may be set at a discount to the share price at the start of the scheme.

Usually this, ours is set at 20% discount to starting price, so can be quite an uplift.

If next years option price is lower, bin the first option and use the returned funds to pay off mortgage.

A win win situation as long as the business doesn't go belly up.

[fandango_c]

ellroy said:

fandango_c said:

The option price may be set at a discount to the share price at the start of the scheme.

Usually this, ours is set at 20% discount to starting price, so can be quite an uplift.

If next years option price is lower, bin the first option and use the returned funds to pay off mortgage.

A win win situation as long as the business doesn't go belly up.

It's a win win regardless of whether the business goes belly up. The only risks really are that the bank or building society that holds your savings goes belly up and the government don't compensate you, or perhaps there is sky high inflation over the next few years.