Tesco shares

OpenToSuggestions · 17 Jul 2008 at 15:06

Being a tesco employee I got some free shares this year. I have also looked at the buy as you earn scheme which lets you buy shares with your wages, and the money used to buy them is untaxed with no NIC's, so basically the shares are heavily discounted.

Would it be a good idea to buy some each month? Or it that a stupid idea?

I really dont have much of an idea how these things work.

ci_newman · 17 Jul 2008 at 15:07

It depends entirely on how well Tesco shares are doing at the moment.
If they are losing value, then surely the value of your purchase will also drop..?

iviv · 17 Jul 2008 at 15:11

Depends on how long you're planning on being there. I can't remember from the time I was at Tesco, but where I am at the moment, you can but a certain amount into the share scheme each month, then after three years they will double up the number of shares for you. And after 5 years, you don't have to pay anything at all on them.

So if you're going to be in the company for at least 5 years, you should definitely do it, if 3-5 then its if you want to risk it. Less than 3 years and its not really worth it.
Though these numbers will change depending on how the share scheme works.

OpenToSuggestions · 17 Jul 2008 at 15:17

iviv said:
So if you're going to be in the company for at least 5 years, you should definitely do it, if 3-5 then its if you want to risk it. Less than 3 years and its not really worth it.
Though these numbers will change depending on how the share scheme works.

I will leave in a year or so time I hope to get a uni placement year.

Was just wondering about the scheme as someone at work buys £50 amonth, but he isnt the brightest lamp and didnt explain too well

I would leave them the 5 years and withdraw NIC and tax free, unless the price rose very high or something. I got 45 free shares worth 195quid, but now they are worth 155 ish so I know the value deffinately fluctuates a lot. What makes value go up and down though?

Thanks for the quick replies

stoofa · 17 Jul 2008 at 15:18

I worked for Tesco a long time ago and over the years got the free shares.
I was only part time but I cashed them in a few years ago and it was quite a nice amount.

The good thing about the staff purchase scheme is that you are also getting to buy the shares at below their current market value.
So they are immediately worth more than you paid for them.
Seriously worth considering and let's be honest - of all the shares you could put your money into, Tesco are the least likely to see a "life ending" drop in value.

Abraham · 17 Jul 2008 at 15:22

do they have any kind of guarantee on your purchase of them?
I know that if you're an AZ employee you get discounted shares which are also then guaranteed to the value they were when you purchased them for x period of time (or something along those lines)

OpenToSuggestions · 17 Jul 2008 at 15:23

stoofa said:
The good thing about the staff purchase scheme is that you are also getting to buy the shares at below their current market value.
So they are immediately worth more than you paid for them.

Didn't know that. You 100% sure we get them at less than market value?? Or is that considering we dont pay tax and NIC on the money used to buy them??
We cannot sell for 3 years though I dont think. Is the reason they have dropped at the moment because everyone is cashing out as its free share time of the year?

EDIT: Also why WOULD tesco want you to buy discounted shares?? Are they trying to shaft us in some way?

iraiguana · 17 Jul 2008 at 15:25

It depends what they offer the scheme at. Our scheme requires you to not sell within 5 years or you lose the 2 extra they give you and you pay tax on them. I believe you also end up paying captial gains tax instead of income tax as its outside of normal pay.

If you wait the 5 years we get 3 shares for the price of 1 so share price would have to drop to 1/3 of its value over the 5 years to not do well. That is very unlikely so its a good long term investment.

I would find out exactly what is on offer and what are the T&C's of sale. Sometimes if you leave within a certain period they can force an early sale whereby you will lose out to tax etc.

iviv · 17 Jul 2008 at 15:25

mglover070588 said:
I will leave in a year or so time I hope to get a uni placement year.

Was just wondering about the scheme as someone at work buys £50 amonth, but he isnt the brightest lamp and didnt explain too well

I would leave them the 5 years and withdraw NIC and tax free, unless the price rose very high or something. I got 45 free shares worth 195quid, but now they are worth 155 ish so I know the value deffinately fluctuates a lot. What makes value go up and down though?

Thanks for the quick replies

When you leave the company, I'm pretty certain you would have to have them taken out of the company account that they are kept in, and moved into your personal account. When this happens, you would have to pay tax, NI and that sort of stuff on the value of the shares. You wouldn't benefit from any things like double shares if you hold them for 3 years or anything like that. But if you can get them for below market value, taking into account you'll have to pay all the tax on them, then its worth a pop, since as stoofa says, its not like they are going to crash.

As for what makes the prices change, I'm pretty sure its based on supply and demand. There are so many shares available. As people buy them, the demand rises, the price rises. If a company releases a report saying they are making a large profit, people will buy shares, causing share prices to rise. And if they are posting a loss, the price drops as everyone sells the shares while they are still high, causing the share price to drop more, and so on.
At least that's what I think, it may be completely wrong, but I think its something like that.

OpenToSuggestions · 17 Jul 2008 at 15:44

Just read the t's and c's on my free ones (found the letter). If I leave the company, all my shares must leave the scheme.
Hopefully this time next year I will not be working for tesco and so doesnt seem like a good idea to buy shares. thanks for all the help though, you have given me an insight to shares

iraiguana · 17 Jul 2008 at 15:46

Glad could help!

Volcs · 17 Jul 2008 at 16:08

You'll be taxed on them too when it comes to sell (normally through withholding).

Rebelius · 17 Jul 2008 at 16:25

didn't read the whole thing, but you should look into Save As You Earn as well as BAYE - with SAYE I think you're guaranteed to get as much back as you put in but with BAYE you can lose out if the share price drops.

There's also something about if you're there for less than 3 years you pay tax when you sell them at the rate tax was when you bought them or something crazy.