The Chancellor of the Exchequer, Philip Hammond, has included provisions to increase the Sharesave contribution ‘holiday’ period from six months to twelve months in his Autumn Budget.
This will be particularly beneficial to employees participating in the tax-advantaged employee share scheme, also called Save As You Earn (SAYE), who need to take a payment break during a period of maternity leave.
Employees are entitled to take a period of up to twelve months’ maternity leave but until now only six months’ break from monthly Sharesave contributions was permitted.
This meant that many women who could not afford to keep their contributions going during maternity leave had to allow valuable Sharesave options to lapse.
The new extended contribution ‘holiday’ will allow all Sharesave participants to take a break from contributions of up to twelve months without their options lapsing. They will be able to re-start contributions on their return to work, and continue to participate in the scheme until its deferred maturity date.
- For more on share schemes, read How to save with your employer
‘Employees won’t be financially penalised for having a baby’
Gabbi Stopp, head of employee share ownership at ProShare, which represents the employee share ownership industry in the UK, says: “I’m delighted that the Chancellor has listened to our Budget representations and to the many MPs who supported us on this change. Millions of UK employees who are eligible to take part in their employers’ Sharesave schemes will now be able to participate without being effectively financially penalised for starting or adding to their family. This will help them build a meaningful stake in their employers’ shares, to save and invest for their futures and those of their families.”
What is Sharesave?
Sharesave or Save As You Earn (SAYE) is a tax-advantaged all-employee share scheme. Employees may save up to £500 per month deducted from net pay via their employer’s payroll, over a three or five-year term.
When they start saving, they are granted an option over their employer’s shares. At the end of that term, they may take their savings back or use them to buy shares under the option that was granted to them. The legislation currently provides for participants to take up to a six month break from monthly contributions and then restart saving without their option lapsing. If they miss a seventh monthly contribution, their option lapses and they may only take their savings back.
ProShare analyses the UK market for all-employee share plans. In May 2017 (the latest research available) it found that 1.4 million employees participated in Sharesave, and the average monthly contribution per participating employee was £156.