Share incentive plan proving a success

FINANCIAL PARTICIPATION

Almost half of leading companies in the UK expect to be operating the government's new-style share incentive plan (SIP) by April 2003, according to a survey by New Bridge Street Consultants.

The survey of 151 companies in the FTSE 350 found that 21% of respondents already offer a SIP, while a further 24% intend to introduce a plan by next April.

SAYE still popular

It is worth noting that the SIP is not being used as a replacement for the Save-As-You-Earn (SAYE) Scheme for employees. Says Rory Cray of New Bridge Street Consultants: "SAYE remains popular, since it is risk free for employees until options are exercised. Overall, 87% of companies in our survey that already offer the SIP also offer SAYE, and 91% of those companies intending to introduce the SIP by April 2003 will also offer SAYE to employees."

What is the share incentive plan?

SIP is a tax-advantaged plan to encourage employees to hold shares in the company or group for which they work. The legislation includes provision for special features to make the plan attractive to unlisted companies, which may not have a ready market for their shares.

Three types of plan shares can be used:

free shares for employees worth up to £3,000 each tax year, which can be distributed according to pay, length of service, hours worked, or even linked to performance
partnership shares worth up to £125 a month or 10% of salary, if lower, which employees can purchase out of pre-tax and pre-National Insurance earnings
matching shares — employers can give matching shares at a ratio of up to two matching shares for each partnership share bought by the employee.

Inland Revenue web site: If you want to learn more, visit . . .
www.inlandrevenue.gov.uk/shareschemes/index.htm

Key findings of research by New Bridge Street Consultants

Among the companies currently operating a SIP:

as many as 98% offer partnership shares
companies providing partnership share are split almost equally between those that do not offer matching shares with partnership share (51%) and those that do (49%).
2% offer free shares only.

Want to know more?

Availability: For further information, contact Mark Anderson, John Lee, David Tankel or Andrew Udale at New Bridge Street Consultants, tel: 020 7282 3030.

www.nbsc.co.uk

Posted 24 July 2002