New SAYE & SIP limits – impact on CSOP

Posted by sahra.tulloch at 15:51 on 28 May 2014


One of the more welcome announcements from HMRC recently was the increase in limits for SAYE (Save-As-You-Earn, or Sharesave) plans and Share Incentive Plans (SIPs). For years, SAYE savings limits have been stuck at £250 per employee per month – and even the relatively youthful SIP has seen no increase in limits since its inception well over a decade ago.

Now employees who participate in SAYE can save up to £500 per month over a 3 or 5 year period – or up to £6,000 p.a. – a very significant amount of savings for an all employee share plan.

Meanwhile, under SIP, the limits are even more generous – if a company uses all the SIP awards available, ie Free, Partnership and Matching Shares – each individual employee can receive shares with a value of up to £9,000 p.a. (out of pre-tax salary). There is no limit at all on the amount of dividends that can be reinvested by participants.

Put the plans together and over a 3 year period you have a pretty generous and tax efficient offering, even for higher paid employees. There are disadvantages – SAYE still suffers from zero interest rates and requires a separate savings account to be set up which can be costly; and the plans offer no opportunity for discretion (other than the fact that the amounts saved or used to purchase shares are likely to be driven at least partly by salary level).

However, with the increased limits, a risk-free savings option under SAYE, and the potential to acquire shares completely free of tax and NICs under SIP, the question has to be… whither CSOP?

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