FINANCIAL PARTICIPATION
Change in bonus rates for SAYE schemes
HM Treasury has announced changes in the bonus rates for the Save-as-you-earn (SAYE) scheme that will maintain SAYE in line with other interest rates.
SAYE is one of four tax-advantaged schemes administered by HM Revenue & Customs and is part of the government's initiative to promote wider employee share ownership across the UK.
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It is a savings plan where employees invest a fixed amount of between £5 and £250 over a three-, five- or seven-year term. At the end of this period employees can use the money, plus a bonus to buy discounted shares in the company they work for. Alternatively, employees can simply opt to have their savings returned to them together with a bonus. These bonus rates increased with effect from 1 September 2008.
Approximately 500,000 employees invest in an SAYE plan each year and are therefore likely to benefit from these increased rates.
New bonus rates
The bonus rates were last changed on 4 April 2008. Details of the new bonus rates, introduced on 1 September 2008, are as follows:
Three-year plans - 4.23% (up from 2.84%)
Five-year plans - 4.36% (3.22%)
Seven-year plans - 4.28% (3.36%)
Early leaver rates for those who withdraw their funds after 12 monthly contributions but before the scheme matures - 3% (2%).
These rates will be effective for employees who sign up to SAYE contracts on or after 1 September 2008 but do not apply to SAYE contracts that commenced before this date. The rates were calculated using a fixed formula developed by ifs ProShare, a membership organisation that acts as the voice of the employee share ownership industry in the UK, and the Treasury. The formula links the rates to long-term swap rates.
A final word
“This is very good news for the hundreds of thousands of employees who sign up to a SAYE scheme each year and should encourage greater take up of what is already a very tax efficient savings mechanism.” - Julie Richardson, Head of Employee Share Ownership at ifs ProShare.
Want to know more?
To find out more about the SAYE rate rise visit the HM Treasury site at www.hm-treasury.gov.uk/newsroom_and_speeches/press/2008/press_90_08.cfm.
ifs ProShare is a membership organisation that acts as the voice of the employee share ownership industry in the UK. More details are available at www.ifsproshare.org.