Share plan trends in 2023 and beyond
Insights - What We Think

With the re-introduction of interest and bonus rates to Save As You Earn (SAYE) coming into effect this month, issuers and employees that are taking part in company share plans will surely be conscious about how these changes will affect their investments moving forward.

In this article, we’ll hear what advice our resident share plans expert, Helen Hopkins, has to offer about how to navigate these changes and further context she can provide from her 35 years of experience.

SAYE background

SAYE, also referred to as Sharesave, is an arrangement under which an employee can save to buy shares in their company at a price which is fixed at the start of the savings period, this price is known as the Option Price.  Participants who join the scheme sign up to a saving contract and agree to save a certain amount each month from their salary.

For any SAYE schemes launched from August 18^th 2023, a new bonus rates will apply. This means the money an employee saves each month for 3 or 5 years will be earning interest.  The Bank of England interest rate is currently 5.25%, and the sharesave interest rate is 2.13%, equivalent to a bonus payment of 1.1 multiple of the monthly savings amount for a 3-year scheme and 3.2 multiple for the 5-year scheme. This money can then be used to buy additional shares at the end of the savings period. For example, an employee saving £100 per month in a 3-year scheme would receive a tax free bonus at maturity of £11.  In the early 2000s, back when the sharesave interest rates were above zero, businesses typically permitted their employees to use their bonuses to buy shares, but there is also the option to receive the bonus as cash.

How the changes will impact issuers?

Helen offered advice for issuers concerned about the new changes:

• Regulation: Reviewing scheme rules is crucial, as are discussions with advisors regarding any updates to the scheme rules that may be required.
• Headroom: Any newly issued shares will count towards the company headroom. The additional shares will also count towards this limit. If that is an issue for a company and the number of shares is oversubscribed then one of the ways a company can scale-down the number of shares is to remove the bonus from the calculation of the shares.

Helen also believes the re-introduction of bonus and interest rates to sharesave is certainly a benefit to the scheme. Along with the obvious benefit of allowing employees to accumulate savings, companies can offer up to a 20% discount on the option price to their employees proving an opportunity for an increase in the share price at maturity. Employees will also see some return on their money (if, for example, they’ve seen a decrease in share price) with the option to take back the money they’ve saved. 

Communications are key to ensuring the benefits from the plan.  Booklets and FAQs will need updating to explain how the bonus is applied.  In addition, issuers will see some changes to the terms and conditions due to the change in the bonus mechanism.

What’s next for Sharesave?

HM Treasury have released a ‘call for evidence’ on SAYE and SIP to discover how businesses are using them and what can be done to change them and make them more beneficial for future use. If you’d like to find out more about this, please click here. 

You can also listen back to our exclusive conversation with Helen Hopkins via our LinkUp360 podcast by clicking here.