Employee Frequently Asked Questions on SAYE

Contents

Q. What is a SAYE Scheme?

A. A SAYE scheme is a savings-related scheme set up by your employer under which you are given a right (known as a share option) to buy a certain number of shares at a fixed price at a particular time.

Q. Who can take part in a Savings Related Scheme?

A. If you are an employee (whether full-time or part-time) or a full-time director of the company granting the option (or any participating company) you must be eligible to participate in the scheme- This is provided that you have been such an employee or director at all times during a specified qualifying period of up to 5years, and you are resident in the UK.

Q. Is there anybody to whom an option cannot be granted?

A. Yes. Options can only be granted to current employees or current directors of the company concerned, or in a group scheme ,of a participating company.

Q. Are there any similar restrictions on exercise?

A. Yes. Again no one is allowed to exercise an option unless he or she is a current director or employee. However options may be exercised after cessation in certain circumstances. For further guidance on this please see Savings Related Share Option (and Save as You Earn) (SAYE) Schemes (RTF 128K).

Q. What is a participating company?

A. This is a subsidiary company of which the company establishing the scheme has control and which can take part in the plan.

Q. What do you mean by control?

A. Control has the meaning in Section 840 ICTA 1988 and will normally include companies in which the grantor company owns more than 50% of the shares.

Q. I am currently working abroad. Can I be granted an option?

A. Provided the scheme is open to all current employees and full-time directors (as above) a company may also extend participation to employees who are not resident in the UK, but there is no requirement for a company to do this.

Q. How do I buy the shares?

A. You can only buy the shares using the amounts that you have saved under a special SAYE savings contract

Q. How do I know how much the shares will cost?

A. The price of shares is fixed at the time that you are given your option The price must not be less than 80% of the market value of the shares at that time.

Q. What is the Market Value of a share?

A. The Market Value (MV) is the price which the shares might reasonably be expected to fetch on sale in the open market. If the shares are fully quoted on the London or New York Stock Exchanges then generally the MV will be the mid market value on the date the shares were granted.

If the Shares are not fully quoted then the MV will need to be agreed with HMRC Shares and Assets Valuation, before the issue of the invitation to participate.

Q. Can I still take part in a Scheme after I have left my employer?

A. Not normally, however, you may be able to use options you already hold, but this depends on the reason why you left the employer. More information about when you can use options under an approved scheme is contained in Savings Related Share Option Schemes (SAYE) - Employees (PDF 89K).

Q. How do I make my savings?

A. You must enter into a special Savings Contract with a building society or bank designated by the Employer. The amount that you agree to save each month is normally taken direct from your pay by your employer who sends it on to the building society or bank. There are special arrangements if you are paid weekly.

If you leave the employer, the payment of SAYE contributions by deduction from your wages or salary will end. If you wish, the bank or building society concerned may allow you, on request, to carry on paying monthly contributions into your SAYE contract, but your option will lapse.

Q. How much can I save each month?

A. The monthly amount you agree to save must fall between certain limits. The limits are currently £5 and £250. After you have entered into your SAYE contract you cannot change the amount you pay each month.

Q. Can I take part in more than one scheme?

A. Yes, but the total monthly amounts you agree to save under all schemes must not exceed the monthly savings limit which is currently £250.

Q. How long must I save for?

A. For SAYE contracts which began on or after 30 April 1996, the fixed period you agree to save for is either three or five years (36 or 60 monthly contributions). After you have entered into your SAYE contract you cannot change the length of it.

Q. When must I decide how long to save for?

A. If your employer gives you a choice, you must decide when you are first given your share option whether your contract is to be

  • a three year contract (36 monthly contributions), or
  • a five year contract (60 monthly contributions), or
  • a seven year contract (60 monthly contributions, which are then left in your SAYE account for a further two years).

Q. Can I postpone my savings contributions

A. You are able to delay the payment of up to 6 monthly contributions in total. But if you fail to make a payment on the due date for a 7th time then this will result in your contract being terminated.

Any temporary postponement will put back the 5 year maturity date of a savings contract for a corresponding period of time

Q. What happens if I want my money back before the end of my SAYE contract?

A. If you want your money back before the end of your SAYE contract, what happens depends on how long ago you made your first payment under your contract.

  • If it is less than a year, you get your money repaid but with no interest or bonus.
  • If it is between one and five years, you get your money repaid with interest.
  • If it is between five and seven years, you get your money repaid with a five year bonus. You also get interest on this total amount for the period over and above five years

Q. Will I be taxed or pay NIC when I receive my option?

A. No. You are not taxed or pay NIC when you receive an option under an approved savings-related share option scheme.

Q. My employer has more than one class of share. Are there any restrictions on which class can be used in a Savings Related Scheme?

A. Yes. Only shares which meet the requirements of Paragraphs 18-22 Schedule 3 ITPA can be used. A detailed explanation of the necessary requirements can be found in Savings Related Share Option (and Save as You Earn) (SAYE) Schemes (PDF 125K).