How to use Sharesave Redux
In my original how to use sharesave SAYE schemes post I assumed that the changes made by my company to stop employees dropping share options that were underwater were universal.
They aren’t – some firms continue to allow employees to drop previous SAYE schemes and reallocate the dropped scheme’s allowance to the current year’s scheme, up to the HMRC £250 a month limit.
This was how my company used to do it, and I always took the line to drop the previous scheme and reallocate to the current one if the current offering’s option price was lower than the previous scheme.
I backtested the efficacy of this approach, compared to the rolling equal allocation I’d have to use now. Turns out the orginal gut feeling to drop was right. Tragically I always spread myself across the 3 and 5 years schemes, failing to appreciate how much better the 5 year schemes were, because of the longer time in the market. So going with my gut was overall only half right, a reminder that for those things that are amenable to analysis, there’s no substitute for doing the analysis, which is what I should have done in those dark days of DOS and Lotus 123, way back in the early 1990s…
cumulative returns of differing approaches to sharesave, using FTSE100 index prices
No-brainer. Go for the 5 year scheme and drop underwater schemes. Note you should still test this with back-values from your employer’s specific share prices, sampled at the time of year your specific sharesave options are granted. This is using the FTSE100 as a proxy for the share price, and your industry may have peculiar cyclical patterns that just might make a difference.
It stacks up with my recollection. Feast in the barnstorming years of the late 1990s, mostly famine since then…
For this to be any use to you you need to be a worker drone in a company that is listed on the London Stock Exchange, and has a save as you earn scheme. In practice I think that means it’s probably a FTSE100 firm. If your firm doesn’t allow you to reallocate previous sharesave allocations before the term is due, the original How to Use Sharesave SAYE post is more relevant to you.
Sir Ermine, I am off topic but I bring important news. This article:
http://www.bbc.co.uk/news/uk-16812185
needs to be “fisked”, and I know you’re up for a challenge. £32/week on mobile phones? £15/week on Sky? My heart is bleeding. What would Mr Jin Liqun say?
by A Feckless Family Fruitlessly Frittering Financial Future Away « Simple Living in Suffolk
[...] take a butcher’s hook at one of these offending families, kindly drawn to my attention by Lemondy, who was in the market for a good rant, pleased to [...]
@Lemondy, haven’t done one of those for a while, thanks for the heads up.
Jin, well, he’d go for the inscrutable look and whisper
those sloth inducing, indolence inducing labour laws.
as he hurriedly checks how his property portfolio is doing back home 
by Where an Ermine learned his first ideas on Finance and What He learned « Simple Living in Suffolk
[...] and strategic approach to his retirement in the second half of the 1980s. He had been in every sharesave scheme, and amassed these shares over time, his employer was a decent dividend payer that served him well [...]
[...] you to drop a scheme and reallaocate the savings allocation to fresh schemes, then you want to read How to Use Sharesave Redux) so though you can drop a scheme you aren’t allowed to allocate that monthly allowance to [...]