ifs ProShare welcome SAYE rate rise

ifs ProShare, a membership organisation that acts as the voice of the employee share ownership industry in the UK, has welcomed the Treasury's recent decision to increase the bonus rates payable on Save As You Earn (SAYE) Sharesave Schemes.

The increases come into force this week and will benefit over 500,000 UK employees.

According to the latest ifs ProShare annual survey, over 2 million UK employees are currently participating in an SAYE Scheme.

An SAYE scheme is a savings plan where employees invest a fixed amount of between £5 and £250 over a 3, 5 or 7 year term. At the end of this period employees can use the money, plus a bonus to buy discounted shares in the company they work for. Alternatively, employees can simply opt to have their savings returned to them together with a bonus. These bonus rates increased with effect from September 1 2008.

Approximately 500,000 employees invest in an SAYE plan each year and are therefore likely to benefit from these increased rates.

Julie Richardson, Head of Employee Share Ownership at ifs ProShare, said; "This is very good news for the hundreds of thousands of employees who sign up to a SAYE scheme each year and should encourage greater take up of what is already a very tax efficient savings mechanism."

The new bonus rates replace those that had been in effect since April 2008 which are listed in brackets:

3 year plans 4.23% (2.84%)
5 year plans 4.36% (3.22%)
7 year plans 4.28% (3.36%)

Early leaver rates (for those who withdraw their funds after 12 monthly contributions but before the scheme matures) 3% (2%)

These rates will be effective for employees who sign up to SAYE contracts on or after 1 September 2008 but do not apply to SAYE contracts that commenced before this date.

The rates were calculated using a fixed formula developed by ifs ProShare and the Treasury. The formula links the rates to long-term swap rates.