Also known as 'SAYE Option Schemes' or 'Save-As-You-Earn Schemes'
- Sharesave schemes are all-employee, tax-advantaged share option plans;
- Options can be granted at a discount of up to 20% of market value;
- The exercise price is funded by tax-efficient savings of between £5 and £500 per month made through salary deductions;
- Options are exercisable after three or five years.
What is a sharesave scheme?
A Sharesave scheme is an all-employee plan which combines tax-advantaged share options with regular savings from salary. An added attraction of Sharesave is that the exercise price of options can be discounted by up to 20% of the shares' market value on grant. Participants build up the funds needed to pay the exercise price over the life of the option by saving between £5 and £500 each month over three or five years in a Sharesave account. Depending on the terms of the relevant savings contract (these are fixed by the government and change from time to time), when it comes to an end participants may receive an additional tax-free 'bonus' which they can add to their savings.
As Sharesave schemes are all-employee plans, a company must invite all qualifying employees to participate. There is, however, some scope to restrict participation to those who have worked for a minimum period of time (not more than five years) and to vary the level of participation by reference to certain factors such as salary, length of service or similar. Sharesave options are not granted subject to the satisfaction of performance conditions.
As with all share option plans there is no requirement for a participant to exercise their option. A Sharesave scheme is unique in that, even if the participant chooses not to exercise, they will still have the benefit of their savings.