Howdy, Getting a 15% discount with money you're paying 40% tax on yields about 1.19 cash unit you need to earn for each 1 cash unit of equity (neglecting broker fees and other expenses). Buying the stock pre-tax with 15% matching yields about 0.87 cash unit earned for 1 cash unit of equity. Not a bad deal. So what considerations are you getting for paying the premium on the after-tax purchase? And what do you sacrifice for the pre-tax purchase? (TANSTAAFL.) There is the tax implication. First, is there a possible downside to taking money out pre-tax? Here in the States some government pay-outs (most notably social security) are based on taxable income. Depending on income and age, there are situations where paying less taxes now can cost you more in benefits later. Second, does the income tax you can avoid now come back to haunt you later? Unless you've been paying off a lot of lobbyist, the government probably hasn't burning the midnight oil figuring out ways to save you money. Is there an extra tax on the back end when you sell, to make up for the tax you didn't pay now? Depending on your current tax bracket and liquidity horizon, it may make sense to take the bite and pay the income tax upfront. And there is the issue of tying up your money with a single stock for three years. You're taking on some added risk there. First there's an issue with investing in a single company versus a fund covering an industry or broader market, but you can easily balance that risk with other parts of your portfolio. Another area of risk is the time element. That's a hard one to get around. Yes, it's IBM, but a lot can happen in three years. For every live-fast-die-young Enron there's a supposedly-old-faithful Polaroid or Arthur D Little. The third element of risk is the old eggs-basket issue. Your employer goes tits up, you lose your job, and just when you need that nest egg the most it is gone. So, I think the incentive to buy pre-tax is pretty strong and probably a good offer to take up. However, due to the restrictions on selling, I say use it as a small addition to your portfolio. Like the money you piss away now on lottery tickets and strippers--that's good disposable income to put into that type of plan. And I would look into that 3-year restriction. Just cause the company says so, doesn't make it legal. In my book, any compensation the company gives you is yours to with as you please. If you can't take your money off the table and walk away, it isn't really your money. IMHO, YMMV, HTH, etc. Sean G. (Disclaimer: I know so much about the stock market I got Ariba at $70, sold at $140, and pissed the earnings away on CMGI. Lottery tickets and strippers would of done me more good.) -----Original Message----- 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.