Discount shares? Quick profit? Maybe not. You need to think carefully about buying Lloyds shares

The five questions you need to ask yourself about the government flogging Lloyds Bank shares to consumers

You may be better off sticking your savings in a deposit account (Carl Court | Getty Images)

The Chancellor has given us all a chance to fill our boots, hasn’t he?

Whoa there! While it’s true that George Osborne has announced small investors can apply for £2bn worth of Lloyds shares that are being flogged by the Government, this doesn’t mean it’s a great offer.

But he’s given us a discount! And free shares! Surely it’s a once-in-a-lifetime opportunity?

Well, to make it seem attractive, Mr Osborne is offering the shares at a 5 per cent discount to the market price when they’re sold off next spring. On top of that, he’s promised a one-for-ten bonus share – up to a maximum value of £200 – for anyone who hangs on to the stock for a year.

So I’d be crazy not to buy shares, wouldn’t I?

If you’re an exprienced investor hoping for a quick profit, bear in mind that you’ll have to hang on for that bonus share. Do you think the price will rise over that period – a time when the bank could well be forced to hand out billions more pounds in compensation for mis-selling payment protection insurance, and will face more questions about its poor-value premium accounts?

If you’re an inexperienced investor more attracted by the handouts, think carefully about the risks. In simple terms the share price of the bank could fall further, with the net result that you might lose money on the deal, even taking the discount and free shares into account.

I don’t care about that. Just tell me how to apply?

At this stage, you just need to register your interest, and your email address, at gov.uk/lloydsshares. You’ll be sent email updates when more details about the sale are available.

It’s likely to be over-subscribed, isn’t it?

It’s likely. Hargreaves Lansdown said it had 120,000 people registering their interest just four days after the announcement. And that’s separate from those who registered with the Government’s own site. But just because there’s a lot of interest doesn’t mean it will be necessarily be a good deal.

Independent Partners: Thinking about investing in Lloyds shares? Read this free guide.