Shareholder benefits Understanding shareholder benefits
If you own individual company shares, you may be eligible for shareholder benefits, also known as share perks or investor benefits.
These benefits are intended to encourage loyalty, and vary from discounts on products to privilege cards.
Though it’s inadvisable to buy shares purely for the benefits they offer, if you already own them, it’s worth making sure that you’re getting all the benefits you’re due.
There are a handful of benefits that can pay for themselves relatively quickly. British Airways, for example, gives investors who own at least 200 shares a 10% discount on any full-price flights they book. For regular long-haul travellers, this discount can save you hundreds of pounds a year.
However, UK Shareholders Association spokesman Roger Lawson admits that most serious shareholders don’t buy shares because of the perk
‘Companies in the retail sector generally offer customers discounts because it builds solidarity with their investor base,’ he said.
Risks of investing in shares
It's important to note that global stockmarkets can become particularly volatile for long periods of time.
The FTSE 100 index of Britain’s 100 largest companies fell 25.01% over the 12 months to 10 July 2009, according to Thomson Reuters, and 29.58% between 2006 and 2009. Some stocks within the index have fallen much further. British Airways, for example, fell by more than 60% between 2006 and 2009.
For this reason, investors need to be prepared to lose their entire investment if they’re investing in an individual company – especially during testing economic conditions.
See our guide to understanding investment risk for more.
Shareholder benefits in decline
Only a small percentage of UK companies offer shareholder benefits and that number seems to be falling. Many of the really lucrative benefits have been withdrawn because of the administration costs.
TD Waterhouse stockbroker James Daly also believes that many of the discounts are now already available to all customers.
‘There’s no doubt that administering share perk schemes is expensive, but shareholder benefits can be a nice way for investors to feel more involved,’ he says.
The rise of nominee accounts, where stockbrokers hold shares on behalf of investors to make trading easier, could be one reason for the smaller take-up of shareholder benefits. Unless a share is registered to the investor’s account, the stockbroker, not the investor, is automatically eligible for the perk.
Investors can negotiate their own re-registration, but shareholder benefit take-up is dropping, according to the industry.
You can usually find details of shareholder benefits on the investor information section of a company’s website, but explanations of the benefit and the terms and conditions of usage can be unclear, so you may need to do more research.