MRM.COM : New employee share plan opens Friday 27 July

koolishy67 · Post by **koolishy67** » 27 Jul 2018, 17:08

After discussed with my financial advisor applied for £50 month, so have to pay £34 instead of £50 plus 2 free shares so if shares price stay at £5 than my buying price work out £2.68.somethin g like that only problem is holding time that I don't mind. If price going down I.get more shares and dividend +.

JKSmudge · Post by **JKSmudge** » 27 Jul 2018, 17:44

I currently put 100 per month into an ISA which 'should' on previous years pay out around 3% pa. So buying £100 worth of RM shares for £68 plus getting an extra 20% of free shares is a no-brainer. I intend to leave at around 63 ( 6 years time ) so this should provide me with a nice little extra unless shares absolutely tank down to £2 in 2024.

Post by **RobertT** » 27 Jul 2018, 18:33

RedRich wrote:Would the money for this be better spent in AVC,s?

That's one of those how long is a piece of string questions, and really depends on circumstances.

There's pluses and minuses with both:

AVC's

+ A gross contribution of £100 only costs £68.
+ You have a choice of funds, all of which invest in more than one company and so automatically spreads investment risk.
+ You can add the AVC's to your pension value(worked out as 20x annual pension) and take 25% of the total tax free.
+ Extra contributions from RM with Bonusplan.
+ Low annual charges compared to separate pension.

- Can't be touched until at least age 55.
- Potentially taxed if taken separately from RMPP or if more than 25% of total pot.

Partnership & Matching

+ A gross contribution of £100 only costs £68.
+ Matching shares off RM.
+ No charges to buy shares.
+ The ability to sell tax free when you leave RM as long as you're aged 60+.

- Have to keep each monthly batch for 5 years to get full benefit, unless leaving at 60+.
- Reliance on just one company(RM) performing well to make money.
- High selling charges via Equiniti compared to other brokers.

There's probably quite a few more that I can't think of off hand!

posted · Post by **posted** » 27 Jul 2018, 20:16

Some people are making this out to be a bad or not-so good scheme, mainly because of the time limit.

Yes a lot of it depends on how long you can tie your money up, to get the tax advantage but also the risk to the share price.

My take on it is that (using a £5.00 share price) £50 of salary sacrifice gets 12 shares at a cost of £34. Those 12 shares work out at £2.83 each. Depends where you think the business is now and where it could go, plus external economic,political activity and technological factors. I’d like to think there would be some steady growth over 5 years and if they did dip a little you would average down your own cost/share.

Now say if the shares did start to tank within the 3 years, you would need to bail out and pay tax and NI. No worse off than having paid tax/NI on the salary in ten first place.

Would have to time it right tho. Within 3 years you can’t sell the matching shares so we’re looking at 10 shares, which you bought for £34 or £3.40 each.

If the share price holds up at £5 then you get £50, less 32% tax/NI, leaving you with the £34 you started with had you not joined the scheme)

Now if the shares really tanked, as long as it was £3.40 and above! It’s better to just leave in there past the 3 year (or even 5 year) period, avoiding the tax/NI.

Yes it’s risky but potentially more rewarding than SAYE. Potentially still able to make a small profit(after tax) within the 3 year period. Obviously more potential if left for 5 years. The SAYE was de-risked by the fact you could get your cash back.

JKSmudge · Post by **JKSmudge** » 27 Jul 2018, 21:27

Another thing to factor in ( If I have correctly understood it ) is that each month your shares are purchased they become legible for dividend payments ( not guaranteed but generally twice a year so possibly a 3 - 4% p.a. return. )

Spedley · Post by **Spedley** » 27 Jul 2018, 21:52

I did the maths today and it looks like mostly a winner.

You are entitled to £1200 per year tax free (set by government), that before tax not after.
Assuming you take the maximum permitted which that is £1200 / 52 = £23.07 per week
After tax (assuming the usual 20%+12% NI) that equates to a weekly wage decrease of £15.69 for full entitlement.

Over a year that equates to £15.69 x 52 = £815.88 total spend.
At current price of £4.69 that gets you nearly 255 shares (£1200 / £4.69)
Then you get 9.4% extra free shares (1 for every 5, max 2 per month at current price) which is a grand total of 279 shares per year

Assuming you can sell those 279 shares in 5 years time tax free you will get (at £4.69) £1308 or 60% profit ... + dividends (very rough max of 5% = £65)

The share price could go down in 5 years but I doubt it will be much. It could also go up. If you can afford the £15.69 per week and you intend in staying in the business for more than 3 years then I see no reason not to buy - you can cancel at any time, then sell and pay the tax or keep for 5 years. If you are staying less than 3 years I wouldn't bother, you won't get the free shares and if you sell you'll only just break even, assuming the prices stays about the same.

Note: the profit varies because of the 2 free shares per month limit but not by too much (I think ?)

loyalsnail · Post by **loyalsnail** » 27 Jul 2018, 22:33

It's a yes from me; as others have said each set of shares has to absolutely tank for you to take a loss.

Each share will get you 23p dividend per year (based on current averages) so a share bought at £4.65 (approx current price) would need to be worth less than £2.64 after five years (factoring in the free shares) BEFORE dividends and about £1.64 after dividends to be sold break even.

If you can leave them alone for five years it's a relatively safe investment.

wandle · Post by **wandle** » 28 Jul 2018, 09:23

One thing to consider if you are going to take part in this scheme: the disproportionately high charges Equiniti make for small share sales.
They charge 0.5% or a minimum of £17.50, whichever is the higher.
So shares purchased via the scheme in October 2018 must be held until October 2023 before you can sell them free of tax/NI. You cannot, in October 2023, sell any of the other shares you've purchased or been given free yet, without incurring tax/NI. So, if you've invested the maximum £100 per month and have 20 partnership shares + 2 free matching shares available to sell, let's say the share price at that future date is 600p

22 x 600p = £132*

a fee of £17.50 to sell is massive, (more than 13% of the shares' value) and eats up a big chunk of the £32 tax/NI you avoided when the shares were originally bought!

I'd say you really would be best waiting until you have a least a year's worth of shares bought under this scheme that have reached the maturity date.
BUT... if you want to do that, you've got to wait until October 2024 i.e. SIX years from when you first start buying shares in this scheme !!!

Lets assume you've then accumulated around 264 shares that are past their 'tax/NI free' date(s). Using the same guesstimate of the share price as in the above example

264 x 600p = £1584

a fee of £17.50 to sell is still steep, but a more bearable 1.1% of the value of the shares

*although if Royal Mail maintain their annual dividends at about 24p/share, dividend payments for that block of 22 shares would have amounted to £26.40 over the five years the shares had been held

posted · Post by **posted** » 28 Jul 2018, 09:59

wandle wrote:One thing to consider if you are going to take part in this scheme: the disproportionately high charges Equiniti make for small share sales.
They charge 0.5% or a minimum of £17.50, whichever is the higher.
So shares purchased via the scheme in October 2018 must be held until October 2023 before you can sell them free of tax/NI. You cannot, in October 2023, sell any of the other shares you've purchased or been given free yet, without incurring tax/NI. So, if you've invested the maximum £100 per month and have 20 partnership shares + 2 free matching shares available to sell, let's say the share price at that future date is 600p

22 x 600p = £132*

a fee of £17.50 to sell is massive, (more than 13% of the shares' value) and eats up a big chunk of the £32 tax/NI you avoided when the shares were originally bought!

I'd say you really would be best waiting until you have a least a year's worth of shares bought under this scheme that have reached the maturity date.
BUT... if you want to do that, you've got to wait until October 2024 i.e. SIX years from when you first start buying shares in this scheme !!!

Lets assume you've then accumulated around 264 shares that are past their 'tax/NI free' date(s). Using the same guesstimate of the share price as in the above example

264 x 600p = £1584

a fee of £17.50 to sell is still steep, but a more bearable 1.1% of the value of the shares

*although if Royal Mail maintain their annual dividends at about 24p/share, dividend payments for that block of 22 shares would have amounted to £26.40 over the five years the shares had been held

I’ve yet to do this with my SAYE shares but I presume after 5 years you should be able to transfer them to another provider such as Hargreaves Lansdown who currently charge £11.95

There’s more app based startups looking to bring down cost of trading shares. Should be established within 5 years.

posted · Post by **posted** » 28 Jul 2018, 10:02

The bit I don’t get is on the green table on page 7 of the booklet.

It refers to rollover and unused allowance matching shares.
Some months there’s less than 5 shares bought but still allocated a 1 matching share and 9 bought but allocated 2 matching.
Also reference to 4 matching rolling over.
I’ll ring helpline Monday but wondering if anybody has any thoughts

Post by **postie2007** » 28 Jul 2018, 15:17

If you are aged 55 buy shares and retire at aged 60 you are classed as a good leaver you can then cash them in without penalty. Can anyone confirm this is right as the info as provided in the booklet.

TIA

Post by **RobertT** » 28 Jul 2018, 15:37

postie2007 wrote:If you are aged 55 buy shares and retire at aged 60 you are classed as a good leaver you can then cash them in without penalty. Can anyone confirm this is right as the info as provided in the booklet.

TIA

Look on page 10 where it says:

What happens if i leave RM?......
You retire in line with our current policy on retirement for the purposes of the SIP (see frequently asked questions)

And then on page 13, where it says:

How do you define ‘retirement’ for the purpose of tax exemption when leaving Royal Mail?
This is currently defined as ‘resignation aged 60 or over’. Please check with HR Services for the latest definition of retirement, if you are planning on retiring soon.

It's basically the same rules as with the free shares!

Schiff · Post by **Schiff** » 28 Jul 2018, 15:45

postie2007 wrote:If you are aged 55 buy shares and retire at aged 60 you are classed as a good leaver you can then cash them in without penalty. Can anyone confirm this is right as the info as provided in the booklet.

TIA

The FAQs say that retirement "is currently defined as resignation aged 60 or over. Please check with HR services for the latest definition of retirement if you are planning on retiring soon".

This suggests to me that they are planning on (or at least considering) changing that retirement age. This would make it risky for someone aged 55 planning to retire at 60 as they won't have held any of the shares long enough when they retire if in 2 or 3 years Royal Mail decide to redefine retirement as resignation aged 65 or over.

I'm in a similar position and due to that risk am going to give this one a miss.

JKSmudge · Post by **JKSmudge** » 28 Jul 2018, 15:49

postie2007 wrote:If you are aged 55 buy shares and retire at aged 60 you are classed as a good leaver you can then cash them in without penalty. Can anyone confirm this is right as the info as provided in the booklet.

TIA

That's how I read it - retire at 60+ and it's all good ( doesn't matter if you are 59 when you start buying, at 60 you are a good leaver and keep Matching Shares and pay no Tax/NI ).

wandle · Post by **wandle** » 28 Jul 2018, 15:57

posted wrote:The bit I don’t get is on the green table on page 7 of the booklet.

It refers to rollover and unused allowance matching shares.
Some months there’s less than 5 shares bought but still allocated a 1 matching share and 9 bought but allocated 2 matching.
Also reference to 4 matching rolling over.
I’ll ring helpline Monday but wondering if anybody has any thoughts

The way I see it, they've set up a 'rolling' entitlement to matching shares, so that you aren't deprived of your matching shares if Royal Mail's share price goes above 500p

Think about it...

The maximum number of matching shares anyone can get in any one month is 2.

If Joe is paying in £50 per month, and the share price is exactly 500p when Equiniti buy the partnership shares on the market, the maths are simple.
Joe gets 10 shares for his money, which automatically entitles him to 2 matching shares.

So let's say in month 2, the share price is 512p. Equiniti buy 9 partnership shares on the market, costing £46.08 but he only gets 1 matching share because although he bought more than 5 new shares, he didn't acquire the ten that triggers 2 matching shares.

Let's say in month 3, RM have released some good results, and the share price has risen to 550p. Equiniti have Joe's £50 plus the unused £3.92 from last month. They can still only buy 9 shares that month, however, because he doesn't have the £55 in their accounts that are needed to purchase 10 shares at this higher price

BUT...

Because he has now purchased 28 shares (10+9+9) in total, and was allocated only 3 matching shares so far, he gets allocated 2 matching shares this month (despite only 9 partnership shares being purchased that month), simply because ownership of 25 or more shares entitles him to be the recipient of 5 matching shares in total.

If they hadn't set things up as described in page 7 of the booklet, then any time the share price is above 500p when the it comes to the 15th of the month, people could be disadvantaged, as it will only be possible to buy 9 (or fewer) shares with that £50. [You cannot buy anything other than whole shares]. In that scenario, they can only give you 1 matching share, because less than ten shares were purchased. People would miss out on a heck of a lot of matching shares if they only got 2 when the share price happened to be 500p or lower !!!