Hi,
As a subtopic in another thread "Making a decision based on data...", forum member Bob_about makes the point that the cycle to work scheme will not work out worthwhile for him becuase his company is making the estimate of "fair market value" of the bike at completion of the scheme by using Ebay prices which he would have to pay if he wanted to keep the bike. This will likely mean the bike will work out more expensive than if he'd just bought it himself up front.
Hi Pedalo
Seeing your post I have managed to have a conversation over lunch today with the person who wrote the report here and who will be administering the scheme for us.
The report which recommended we adopt the scheme refered to another local organisation which makes a final 13th deduction at the same rate and takes that to be the fair market value for the bike. The report notes, however, that the scheme prohibits the agreement of this value at the start of the agreement and that other options such as comparison of prices on e-bay or phone calls to local cycle shops as a check could be used. From the meeting minutes it is not clear how much this was debated or discussed.
The person who will be administering the scheme is clear that they will not have time to chase round e-bay, inspect the condition of bikes, or start ringing cycle shops to get estimates of the value. They would prefer to charge a final deduction at the same rate to transfer ownership and that is what they are proposing to do when the scheme is introduced in the spring.
This is re-assuring to hear, but not completely cast iron. This person could leave, could be instructed to implement the scheme differently or could be audited and required to make additional checks on fair market value.
The bottom line here, as I see it, is that the scheme relies on emplyers being prepared to bend the rules a little to work around the letter of law in how it has been set up - a typical fudge of something designed for a different purpose. This will always leave the employee potentially vulnerable as it is clear that the final value cannot be agreed prior to signing up, so we have to sign up trusting that a certain approach will be taken, with no written gurantees. (but as Patrick said, if you cannot trust your employer, then a cycle scheme is the least of your worries!)
Having said that, the person I spoke to sees that the company will recoup all its outlay over the 12 repayments
They will also make a small profit from the 13th settlement figure and from not having had to pay the employers proportion if NI contribution on the sacrificed element of the salary. Therefore would be no motivation to take a harder line and charge more and so they are 99% confident that this is how it would pan out.
Therefore the figures would look like this
Cost put through scheme - £1000
Gross Monthly reduction - £72.46
Net salary sacrifice - £50.00
Cost over 12 months - £600.00
Final payment to transfer ownership - £50.00
(from net salary this time as annual salary will have gone back up to pre-scheme amount)
Total cost of £1000 worth of bike - £650.00
Settlement figure equates to 5% of initial cost as indicated as a guide on the cycle scheme website.
Apologies if my previous postings refering to e-bay valuations was misleading or alarmist. I confess I was not in full possession of the facts not having spoken directly with the person who will administer the scheme.
I now have and have changed my opinion of how useful it could be for me. I am reasonably confident the scheme could help me save some money providing the supplier is prepared to play the game as well in removing battery etc to reduce my chosen bike to £1000 and then let me buy the additional kit outside the scheme.
Feels like alot of faff, but I guess only has to be done once, and the advantage is spreading some of the cost over 12 months!
Hope this post makes sense?!
All the best
Bob_about
