Sharesave schemes must be made available to all a company’s employees on broadly similar terms. They have been available for a long time but can be useful as a supplement for those larger organisations that wish to offer all of their employees a long term incentive.
Sharesave schemes operate as a combination of a regular savings arrangement and share options.
Option
Employees can enter an option to acquire shares three, five or seven years in the future at a price determined at the start – that price can be discounted by up to 20% of the market price at the start.
Savings account
The employees pay a designated sum into an authorised savings account for the period of the option with the savings institution adding a fixed bonus at the end of the period. However, the total maximum monthly amount of savings per employee is capped at £250.
At the end of the savings period, the employee can opt to use the total funds to buy shares or, if the share price has fallen below the option price, simply withdrawn the funds tax free. If an employee acquires shares and subsequently sells them, any gain over the option price is liable to capital gains tax – although often such gains are more than covered by the individual’s annual gains exemption.
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