Personal Finance: A little bit on the side
You shouldn't let them affect your choice of investment but shareholder perks can be well worth having, says Harvey Jones
Sunday 10 January 1999
Growing numbers of companies are rewarding investors with a range of perks, usually in the form of discounts on their products or services. The aim is to foster a closer bond with the company than would come from simply watching share movements, and to encourage people to invest in return for a freebie or two.
Last year's pounds 1.3bn Thomson Travel Group flotation highlighted the attraction of share perks. The offer of a 10 per cent reduction for shareholders on the price of all Thomson and Skytours holidays triggered a stampede of investors.
However, the share price has fallen 20 per cent since the float, which highlights the golden rule of investing for perks: they have their charms but should be seen as a bonus, and should not sway your decision to invest.
Investors in Forte Posthouse have been lucky. Many were seeking discounts on hotel accommodation, but saw shares rise after a takeover by Granada Group. Granada now offers investors with a minimum of 80 ordinary shares up to 12.5 per cent discounts on Forte Posthouse and Forte Heritage, Le Meridian, Travelodge Hotels and Little Chef restaurants.
Elissa Bayer, head of private clients at the London office of the stockbrokers Greig Middleton, says the most popular perk is offered by P&O. Shareholders receive a 50 per cent discount on Dover to Calais ferry crossings, with lesser discounts on other crossings, if they hold a minimum of pounds 600 in P&O concessionary stock. Hold pounds 300 in stock and these discounts are halved. The other highly cherished investment for perk seekers are Wimbledon debentures, which can cost up to pounds 30,000 but offer the reward of one centre court ticket a day during Wimbledon fortnight.
Ms Bayer stresses that share perks are not automatically given out. In many cases you have to apply for them and many of her clients do not bother, she says.
A booklet setting out attractive perks for UK shareholders is available from Hargreaves Lansdown Asset Management. Peter Hargreaves says that although they should only be seen as a bonus, some perks can add value to an investment and may be worth taking into account.
"I think they can be quite useful, and they are also tax free. For example, Whitbread's book of vouchers is worth around pounds 50 a year. With a pounds 50 dividend on pounds 1,000 of shares, you are looking at a 10 per cent yield."
Some companies will not offer perks if you hold their shares in a nominee account (when your shares are held by your stockbroker) or if you keep them in a PEP.
When considering perk options, you must also check the minimum holding required to claim and that you are buying the right type of share. You may also have to hold the share for a set period, often 12 months.
Some companies, including Iceland, Airtours, Ladbroke Group and Whitbread, offer discounts to all shareholders. Ladbroke discounts include 10 per cent off rooms, food and drink in Hilton UK and overseas hotels, with 20 per cent discounts on published Leisure Weekend prices.
Airtours offers 10 per cent off holidays for shareholders, with one free bottle of champagne per booking on the holiday flight. Iceland offers 10 per cent discount vouchers on groceries.
You will need to hold 1,250 ordinary shares for a minimum of six months to get a 10 per cent discount at Moss Bros, 600 ordinary shares for a 10 per cent discount at Thistle Hotels, and 500 ordinary shares for a 20 per cent discount on weekday meals at Harry Ramsden's.
One discount that may appeal to many is a pounds 1 discount on any purchases costing more than pounds 5 (excluding medicines and gift vouchers) from Boots if you have more than 100 ordinary shares. People with more than 200 ordinary shares in British Airways will get 10 per cent off published fares.
Jonathan Fry, joint managing director with Premier Asset Management, which also publishes a perks guide, says perks may be worth a look if you are a regular user of a particular service or product. Regular shoppers at Next, for example, may benefit from a 25 per cent discount at stores, although 500 shares are needed - which would set you back almost pounds 2,800.
Mr Fry picks out Barratt Developments as a good perk deal: hold 1,000 shares for 12 months and you get pounds 500 off every pounds 25,000 you spend on one of its properties. McCarthy & Stone offers a pounds 1,000 discount per property if you hold 500 ordinary shares for 12 months before purchase.
He says Tottenham Hotspur, which offers shareholders a 10 per cent discount at Spurs Superstores, may be a good all-round investment now that George Graham has been appointed manager.
The trend is for companies to offer a percentage off purchases, rather than cash vouchers. "After all, they are not giving perks because they love you but because they want to encourage you to do business with them," Mr Fry says.
'Independent on Sunday' readers can get a free copy of 'Attractive Perks for UK Shareholders', usual price pounds 3, from Hargreaves Lansdown, by phoning 0800 850 661.
Premier Asset Management is also offering a copy of its guide to perks worth pounds 2.50 free to the first 100 'Independent on Sunday' readers to phone 0800 212577.
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