We have recently seen equity markets at or near all-time highs, which is good news for equity investors generally. It is, however, especially good news for participants in employee shares schemes whose interests mature at this time.
Earlier this year, it was reported that more than 55,000 Tesco workers would be sharing in a pool of £144.4 million as two of the company’s employee share schemes reached maturity. In simple terms, the amount invested had effectively doubled in value due to the performance of the Tesco share price over the last five years. It was understood that around 10,000 employees saved £50 a month for five years under the save as you earn scheme and would see their initial investment of £3,000 double to £6,000, with the additional benefit of tax relief.
This is especially noteworthy given the current economic downturn and the impact this has had on the Tesco share price. There are obvious benefits to employees and employers in such arrangements, and these share schemes have been known to improve loyalty amongst a company’s workforce.
There are now many similar save as you earn schemes in the UK with increasing numbers of employees taking up the option of putting away relatively small amounts of money each month for up to 5 years.
However, save as you earn schemes constitute only one type of employee share scheme, some of which have tax benefits.
More recently, it has been reported that employees of Royal Mail have become able to sell shares which they had been allocated free of charge under a tax-advantaged share incentive plan. If, however, they delay selling until 2018, they will be able to sell without paying any tax at all.
Additionally, while save as you earn schemes and share incentive plans are more prevalent in listed companies, private companies can also make use of tax-advantaged share schemes, such as the popular enterprise management incentive.
Click here to view an animated introduction to share schemes
You will also find further detailed information about the schemes available on our website here .