SAYE rate boost
From 1st September 2008, the bonus rates for Save-As-You-Earn (SAYE) schemes are increasing. For the 3 year plan, the bonus rate (expressed in monthly contributions) rises from 1.6 months (an effective interest rate of 2.84%) to 2.4 months (4.23%). For the 5 year plan, the bonus rate increases from 5.1 months (3.22%) to 7 months (4.36%), and for the 7 year plan, the bonus rate of 9.8 months (3.36%) goes up to 12.7 (4.28%). All bonuses are tax free.
The SAYE share option scheme remains a popular way of providing equity incentives to staff. This is the case despite some companies being caught by bizarre accounting rules (FRS20 and IAS2) which require them to take an accelerated charge to profits if the share option contracts are cashed in early. In fact, the ability for employees to choose a cash repayment instead of acquiring shares is one of the big advantages of the SAYE share option scheme since it reduces risk to the employee.
Meanwhile, calls are growing for the SAYE savings limit to be increased from the present monthly limit of £250, which has been unchanged for many years. The Irish government recently decided to increase the savings limit on their SAYE share option scheme (very similar to the UK version) to a total of £30,000 over a five year savings term.