Sharesave or Save As You Earn (SAYE) is a tax-efficient cash saving scheme that lets you save towards buying shares in your company. At the end of the savings period you have the opportunity (option) to buy shares in your company or take out your savings in cash.
The scheme has 2 components: a savings contract and a share option.
Anyone employed by the company, or one of its subsidiary companies, that participate in the scheme and who is eligible to join. The company may set an eligibility period. This means that an eligible employee will need to have worked for the company for a minimum amount of time before joining.
Your company will decide whether or not to set up a Sharesave scheme. It will then decide how often to invite eligible employees to join - this may be on an annual basis or every few years. There will be an invitation period (of about 2 or 3 weeks) during which you can join.
You will need to complete an application form within the timescales set for the launch. Your invitation information will let you know the various methods that you can use to apply.
When the scheme is launched you can choose how much you would like to save and for how long (depending on limits and terms offered by your company). The money is deducted from your net pay and paid into a savings account for you. The amount of any interest or bonus (at maturity) that will be paid on your savings is set at the beginning of the scheme (and is determined by the savings prospectus).
When you join the scheme a special share price is set (known as the option price). This is the price at which you can buy your company's shares. At the end of your savings period you choose whether to use your savings to buy shares in your company at this option price or whether to take out your savings in cash.
The option price is set when the scheme is launched. It is based on your company's share price at the time of the launch. Your company can choose whether or not to discount this share price by up to 20%. Once the option price has been fixed, it is the only price that you can pay to buy shares at a future date. If at invitation the option price on the application screen is showing as blank this is because the option price has not yet been set.
The 'Total Option Cost' is the amount, from your savings, needed to buy all the shares under option for each scheme. It is calculated by multiplying the number of shares you have under option by the 'Option Price'.
This scheme lets you share in the success of your company. If, at the end of your savings period your company's share price has increased, you can choose to buy shares at the option price. It's an effective way of buying shares at a discounted price and lets you enjoy the benefits of share ownership.
Your company will set the minimum and maximum amounts that you can save (the maximum across all Sharesave schemes is £500 per month). The savings prospectus sets out the maximum amount that you can save, for your scheme, per month. Once you have decided how much to save, the savings amount is fixed for the period of the scheme.
If the total number of applications exceeds the number of shares available, the amount of savings you apply for may be reduced (scaled down). You will be notified if scaling takes place.
If you are paid weekly, fortnightly or 4-weekly, information will be provided to you at the scheme's launch to let you know whether your payroll will be able to arrange for your contributions to be deducted each pay period. Please remember that when you apply your weekly or fortnightly value will be changed into a monthly equivalent value which will show as your 'monthly savings' value.
Your company will set the savings period at 3 or 5 years. Once you have made your application, the savings terms is fixed and cannot be changed.
If your employer gives you a choice, you must decide when you are given an invitation to apply for a share option whether your contract is to be
- a 3 year contract (36 monthly contributions), or
- a 5 year contract (60 monthly contributions)
After you have entered into your Sharesave contract you cannot change the length of it.
If you complete your savings contract you will be given a savings 'bonus' (the equivalent to receiving a set amount of interest). The bonus amount is fixed at the beginning of the scheme and is determined by the savings prospectus current at the time of the scheme's launch. To calculate the bonus value multiply the bonus rate by the amount you have chosen to save each month. Bonus rates do change from time to time as they are based on current interest rates. If interest rates are low, the bonus rate can be set at zero. The bonus rates will be different depending on whether you choose to save for 3 or 5 years.
Key dates are:
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eligibility date (you must be employed by the company on this date to be able to apply for the scheme);
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invitation date (this is the date that you can start to apply for a scheme);
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offer or invitation closing date (all applications must have been received by this date and time);
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date of grant (the official date on which you are given ('granted') your share option);
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date of your first deductions from pay;
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contract start date (this is the date that the first monthly contribution is due);
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maturity date (3 or 5 years from the contract start date);
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last exercise date (the latest date on which you can provide instructions to buy shares under option); and
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lapse date (if you have not bought the shares under option, the date on which you lose the option to buy the shares.
At the end of your savings period you can choose to have your savings back or spend it on buying shares under option. If your company's share price has risen and is higher than the option price you can benefit from this increase. If the share price has fallen and is below the option price you do not need to buy the shares under option and you can have all your savings/bonus back.
Unless you wish to amend your choices, you do not need to submit an online application form if you have already submitted one through another channel. If you've sent a postal application, remember to allow at least 5 days for us to receive and process this.
Where your company allows applications by different channels and you wish to amend your choice, where possible you should use the same channel which you used originally to apply.
You can choose, for whatever reason, to miss up to 6 monthly payments. If you do miss payments, your contract term will be extended by 1 month for each monthly payment missed. You will still need to make up the missed contributions so that you make the full 36 or 60 monthly payments. If you miss 7 monthly payments your savings account will be closed, your money will be returned to you and you will not be able to buy your shares under option.
If you do wish to miss payments you may need to make arrangements with your payroll.
Please see the above on company takeovers. In other circumstances you won't have to pay Income Tax on your shares when you buy them. However, you may be liable for Capital Gain Tax (CGT) on any gain between the option price and the market price when you sell the shares. Further information about CGT can be found at
www.hmrc.gov.uk/cgt/. Alternatively, you may wish to seek independent tax advice.
Please note that references to tax on this site are for guidance only. For further advice on Income Tax and National Insurance Contributions (NICs), you should contact an Independent Financial Adviser.
Further information regarding taxation and NIC can be found on HMRC's website at
www.hmrc.gov.ukHMRC removed 7 year savings contracts and extended bonus rates on 5 year savings contracts on 23 July 2013. If you entered into a savings contract prior to this date, you may have applied for a 7 year scheme. You will make 60 contributions which are then left in your account for a further two years. For 5 year schemes, you may receive an extended bonus if you leave your savings in your account for a further 2 years until the seventh anniversary of the contract start date. You should refer to the Prospectus that was issued to you at the time you applied for information about any relevant rates.