Change in bonus rates for SAYE sharesave scheme 17-02-09
Submit Articles Back to Articles
Issued 17 February 2009
The Government today announced changes in the bonus rates for the Save As You
Earn (SAYE) Sharesave scheme that will maintain them in line with other interest
SAYE is one of a number of Government initiatives promoting wider employee
The bonus rates were last changed on 27 December 2008.
The new bonus rates effective from 17 February 2009 will be:
||Bonus Rate(Previous rates in brackets)
||Annual Equivalent Rate(Previous rates in brackets)
| 3 year
|| 0.6 x monthly payments (1.5)
|| 1.08% (2.67%)
|| 2.6 x monthly payments (4.8)
|| 1.67% (3.04%)
|| 5.6 x monthly payments (9.3)
|| 1.98% (3.20%)
The Early Leavers’ Rate will be changed from 2% to 0.5%.
Employees who sign up to SAYE will receive the bonus rate for the relevant
contract that was in force at the time they joined the scheme. They will
not be affected by future bonus rate changes.
1. SAYE is a savings vehicle for employees of companies which operate savings
related share option schemes that are HMRC approved.
2. The company offers its employees the option to buy shares in the company
at a future date. The option may be granted at a discount of up to 20% of
the current share price.
3. The employee then saves between £5 and £250 per month out of taxed pay on
a 3 or 5 years saving contract. The 7-year “contract” is actually a 5-year
contract where the employee leaves the contributions in for a further 2 years.
When the contract matures, a tax-free bonus is received. The employee can
then choose either to exercise the option to buy the shares with the proceeds
from the savings contract (there is no obligation to purchase), or just to take
the proceeds and the bonus.
4. The bonuses are equivalent to fixed rate interest and are set by the
Treasury. In normal circumstances, no income tax or National Insurance
Contributions are incurred on the granting or exercising of options.
5. SAYE schemes are operated for companies by banks, building societies, or
European Authorised Institutions. These must first be authorised by HM Treasury
to operate SAYE schemes.
6. The bonus rates for 3-, 5- and 7-year SAYE contracts are adjusted
automatically on an annual basis by linking them to 3, 5 and 7-year market swap
rates (the market reference swap rates).
7. The bonus rates are adjusted to maintain the following gaps in basis
points (bp) under the market reference swap rates:
||Basis point margin under market swap rate
||205bp under 3 year market reference swap rate
||175bp under 5 year market reference swap rate
||165bp under 7 year market reference swap rate
8. For the annual revision of SAYE bonus rates, the market reference swap
rate for the relevant 3, 5 or 7 year SAYE contract is the average over the last
10 working days of June for the new bonus rates which come into force on 1
September the same year.
9. The mechanism allows for bonus rates to be adjusted during the twelve
month period if the market reference swap rates move dramatically. This
adjustment is triggered if the 3 or 5 year swap rates (measured as an average
over a rolling 30 day period), are greater than or equal to 125bp below or above
their reference levels at the start of the 12 month period (or any adjusted
level which may be in force).
10. If this trigger condition is met, the bonus rates are reset to maintain
the 205bp, 175bp and the 165bp gaps under the new reference swap rate as
appropriate, which is the average swap rate over the last 10 working days of the
30-day period. The bonus rates will then apply until the annual reset. A
further interim adjustment to bonus rates is possible if the market reference
swap rates were to move significantly and the trigger condition was met again.
11. If the trigger condition is met, the Early Leavers’ Rate may also be
changed in order to ensure that it gives a fair return to those who do not wish
to or are unable to carry on for a three-year period and so do not qualify for
the standard scheme bonuses and benefits, whilst maintaining an effective
incentive for continued participation in the scheme.
12. For more information about employee share schemes, including SAYE, visit
the HMRC website:
Share Schemes (HMRC
About the Author
© Crown Copyright. Material taken from HM-Treasury.
Reproduced under the terms and conditions of the Click-Use Licence.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2009-02-18 19:05:54 in Tax Articles