‘I pocketed £100,000 in five years from Costa Coffee’

For the past five years Chris Thompson (pictured above) has saved £250 a month into a share plan at his company, Costa Coffee.

The store manager said he could see that the chain, part of Whitbread, “was going places” – so shares in the firm were an attractive place to put aside his monthly savings.

But he never imagined the windfall waiting for him five years down the line. His savings, which totalled £15,000, were in February turned into nearly £100,000 when the scheme matured.

Mr Thompson’s success, which will enable him to take his family on the holiday of a lifetime to Australia and New Zealand is no investing anomaly.

Thousands of employees who began saving into the company’s SAYE (Save As You Earn) share scheme five years ago are in line for windfalls of similar sizes. And they now have the chance to double their money.

Those currently cashing in five-year plans are reaping the rewards of an option price set when the FTSE 100 stood at around 3500. Today it is trading at around 6550.

Jennifer Rudman, SAYE scheme manager at Equiniti, the share registrar, said: “Those who saved into five-year plans have done particularly well. Markets were low when these were launched and some company shares have risen dramatically since then.”

Earlier this year waitresses and chambermaids picked up life-changing nest eggs of up to £77, 300 when Whitbread’s five-year plan matured.

Staff of Next, the fashion chain, who made the maximum contribution over five years are on target for a nice surprise of more than £70,600 when their scheme matures in December. Last November, Hargreaves Lansdown staff picked up more than £100,000.

Staff at these companies must have made the maximum £15,000 contribution over the term and still be employed by the company to reap the full rewards.

BT set a lower maximum for its scheme of £225 monthly, giving a maximum £13,500 saving. Yet staff who saved in full could still pick up more than £85,000 when 24,000 of them share £1bn this August. The average windfall is estimated at £44,000.

Companies are already gearing up to launch new schemes to enable staff to double their monthly contributions.

Louise Drake, share scheme manager at Yorkshire Building Society, which like Equiniti administers plans on behalf of firms, said: “The response to the savings limit announced in the Autumn Statement has been very positive, with several companies offering the increased limits and some deferring invitations to take advantage of the increase until the new tax year.”

Sarah Lord, a financial planner at Killik & Co, said: “If your employer offers these schemes, it is my view that staff should take up the offer, as these results show there can be a real benefit.”

But employee share schemes are not without risk, as many millions holding bank shares discovered in the financial crash.

For example, the share price of Royal Bank of Scotland collapsed from £10.22 in January 2007 to £2.20 in January 2009, dipping as low as 10p en route.

Ms Lord added: “It is important to ensure that not all your savings are with your employer, as you can have too extreme an exposure if your company share price fell.

“As we saw in the financial crisis with the banks, staff who had done well when the shares were rising held on to them for years afterwards. These savings were then badly hit by the crash.”

So if you are offered a share saving scheme by your employer, should you join? We answer your questions.

How do SAYE share option schemes work?

Employees can invest up to £500 monthly into a three or five-year deposit account. At the end of the term they are free to take the cash.

Currently no interest is payable on this money, although a small tax-free bonus has been added as an incentive in the past. When interest rates rise again, the expectation is that this bonus will be reinstated.

Alternatively, you can buy shares in your employer at a discount. The share option price is set at a discount of around 20pc of the share price when the scheme is launched.

Any gain is liable to capital gains tax (CGT), but only when you sell the shares. Given that the tax-free CGT allowance has just risen to £11,000, most individuals should be able to release gains tax free by phasing encashment. If you transfer your shares into an Isa within 90 days of acquiring them they will also be free from tax. For 2014‑15 you can transfer up to £11,880 worth of shares, or £15,000 after July.

How employees make money

Around 1.2 million employees are currently saving into SAYE plans, but the five-year schemes maturing this year look the most profitable.

BT staff in the five-year scheme maturing in August look to have done well because the share price was hovering at around 70p when the option price was set, so staff could lock into an option price of 61p. Today the shares are trading at 382p.

Earlier this year, staff at Whitbread were able to buy shares at an option price of 728p; they were at £37.50 when the scheme matured.

Many staff with three-year schemes have also made big gains, but it is the five-year plans maturing last year or this that have reaped the biggest rewards.

For example, this December Next has three schemes maturing. The three-year scheme has an option price of £20.84, the five-year scheme has an option price of £14.34 and the seven-year scheme (no longer available) has an option price of £15.76. Next shares are currently worth around £67.50.

Can you lose money?

No saver is forced to buy shares at the end of the term, so technically you cannot lose your money, and these monthly savings options are safe. However, if the shares perform badly or mature in the midst of a stock market crash, you may not want to take up your option to buy them. In this case you might have lost out on better returns from a deposit account.

The danger lies with staff putting all their savings into a succession of share schemes and then holding on to the stock after the share scheme has finished. Many bank staff saw their savings decimated when the banks collapsed.

Patrick Connolly, a financial adviser with Chase de Vere, said: “If offered these schemes, it is usually a good idea to join, but you must be very careful. It is never a good idea when it comes to investments to have all your eggs in one basket, because you will be hit very hard financially if anything goes wrong. So once the schemes have matured you should consider diversifying.”

First Class

Royal Mail’s sell-off was a prime example of how staff can benefit from their employers. Workers received a windfall of nearly £4,000 when their company floated last October and they were given free shares currently worth around £5.50 each.

Each member of staff received 613 shares on issue, the maximum permitted in a single tax year. These were this week boosted by a further 112 shares.

Although the share price peaked at £6.23, staff were not able to cash in at this high, as the plans were paid into a share incentive plan which cannot be liquated for three years.

This means they must wait until 2016 to cash in the first tranche and 2017 for the second windfall.

‘A win-win opportunity’

Costa Coffee manager Chris Thompson believes Save As You Earn share schemes are “fantastic” after his scheme netted him almost £100,000.

Mr Thompson, from Chester, opened his first plan five years ago, locking into a share price of £7.28. He saved the maximum £250 monthly, which allowed him to buy 2,300 shares when the scheme matured in February. The shares are currently trading at £41.13, giving a windfall of £94,599.

The money will allow the family to take a dream trip to New Zealand and Australia.

“My wife has a brother in New Zealand, so we have dreamt of visiting him. Now we can combine it with the trip to Australia,” Mr Thompson, a father of three, said. “The rest we will put towards savings for our boys.”

He has spent a career in catering and moved to Whitbread 14 years ago. “I was attracted by the share scheme,” he said. “Now when we are busy and rushed off our feet, I don’t mind working hard, because I am working for myself. It’s a win‑win opportunity.”


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