[thechat] Employee Share Purchase - opinions..?

Martin Burns martin at easyweb.co.uk
Tue Dec 10 15:01:00 CST 2002

On Tue, 10 Dec 2002, Luther, Ron wrote:

> Hi Martin,
> It depends.  How close are you to retirement?    ;-)

heh. Not close enough. (there are nice UK tax rules about employee share
ownership where you don't get taxed if you sell on retirement compared to
leaving the company as a normal leaver)

> I think 'Option 2' gives you a hair more equity, (since you are playing
> with the deferred tax money),

/me is paying 40% income tax...

> but that's probably only of interest in a
> long term play for value growth. i.e. Leaving it alone versus viewing
> it as an 'annual bonus' to be cashed in as soon as possible.

Yep - I'm viewing it as a contribution to my pension.

> [Contrarian Ron: Then again, cashing it in as soon as possible leaves
> you free to reinvest the 15% gain in 'better' opportunities ... ]

Which is why I'd probably do a bit of each. And I can invest a max of
UKP125 in the Option2 anyway (UK tax rules I think), so that's not really
enough to cash in as an annual bonus.

> Personally, I dislike keeping accounting records ... so I usually
> go with 'option 1' since it's a lot simpler for poor folks like me.
> Example - play out 'option 2' seven years down the road ... now you
> want to sell "x" shares.  You not only need to prove that all "x" of
> them are more than 3 years old, but you also have the fun of computing
> the net gain/loss.  Yuck!  [The phone company used to have paper
> worksheets to help you through these calculations.]

Oh yeah, I hate that. Fortunately, the company provides regular statements
and does the maths.

> Of course, it goes without saying (and I'm sure I'm not the only one
> here who can attest to this) that one 'Sept 11th' event can tank
> all of your tech stock holdings at any time ... making the choice
> somewhat moot.

Depends on the point at which you sell... and buying after a crash can
be good too.

Thanks for the info Ron - lots of useful things to think through.


> -----Original Message-----
> From: Martin Burns [mailto:martin at easyweb.co.uk]
> 1) get a 15% discount on the trading price on the day of purchase (ie
> payday) or the offer price (whichever's the lower), paid out of post-tax
> income
> 2) Buy the shares from pre-tax (gross) income at normal trading price and
> get additional matching shares equivalent to a 15% discount, but there's a
> lock-in of 3 years before I can really sell them without costing money.
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