Savings rates are on their knees - but if your employer offers a company share scheme, then saving into it could give your cash the helping hand it needs to grow.
Share schemes are incentivised workplace savings schemes open to employees of publicly-listed companies. The most common type is Save as You Earn (SAYE), which lets you deposit up to £250 a month into an account for an agreed period, at the end of which you can buy discounted shares in the company you work for.
By doing this you have the opportunity to beat the interest rates you'd get if you put the money in the bank - without the risk of losing your capital - unlike if you bought shares on the stock market yourself.
SAYE normally has a high uptake among workers, which is no surprise when analysts such as Ben Yearsley, head of investment research at Charles Stanley, describe the concept as "almost a one-way bet". He says because the shares are normally offered to you at such a heavy discount and you will never get less out of it than you put in, you "can't lose".
But others have concerns that share schemes encourage you to put all your eggs in one basket so if your employer goes bust or runs in to trouble, it's twice as bad. Abraham Okusanya, principal at FinalytiQ, warns investing heavily in your employer shares is generally a bad idea and says they "concentrate risk and lack diversification".
Another downside is that new rules for SAYE brought in by the government last year mean your money has to be held in a non-interest bearing account, meaning if you decide not to buy the shares at the end of the agreed period, you'll end up with a slightly smaller pot of cash than you'd have if you'd opened any interest-bearing bank account. And if interest rates rise this effect will be even more amplified. You could also lose out to inflation eroding the value of your capital.
If you do take up a SAYE scheme, you need to be careful when you've finally bought the shares. This is where the risk comes, because you have to decide whether to hold or sell - and what you should do is highly dependent upon your personal situation and how the shares are doing.
Ask your HR department if you want to find out more about your company share scheme options.
