(Also called Share Save)
A commitment to save a fixed monthly amount deducted from your pay by your employer for 3, 5 or 7 years at the end of which you are paid a bonus. When you join, you are given the option to buy a fixed number of shares in your company at the end of the3, 5 or 7 years. The number of shares is the amount your total savings (with or without the bonus depending on the rules of the company) could buy at the price (or 80% of it) when you started to save 5 or 7 years earlier. Up to 6 payments may be delayed: your contract is then extended by the same number of months. If you change employers, you lose the right to buy the shares but may continue saving.
Who can invest Anyone age 16 or over who works for the 1,200 or so companies which run a scheme and who has been an employee for long enough, eg. 2 to 5 years. About 1.75 million employees belong to such a scheme.
How worthwhile Good value. Excellent value if your company's shares go up over the 3, 5 or 7 years you are saving.
Minimum £5 a month.
Maximum £250 a month.
Suitable Regular savings.
Money back In 2 to 3 weeks. No partial withdrawals. During the first year money back with no interest. Then your money back plus a reduced interest rate of 2% a year (3% for contracts started before 1 October 2001). If you retire, are made redundant, or become permanently disabled and leave, you can normally cash-in and buy some shares. You can continue the savings scheme if you leave the company but you are not eligible to buy the shares when the plan matures - you get your money back instead.
Interest Fixed. For schemes taken out on or after 1 October 2001 equivalent to 3.67% a year for 3 year contract; 3.99% for 5 year contract; 4.07% for 7 year contract. Previous contracts started 1 October 1998 to 30 September 2001 for 3 year contract 4.83% a year; 4.659% for 5 year contract; 4.52% for 7 year contract. When the contract matures you can either take the proceeds, buy the shares and immediately resell them at a gain if they have risen in value or you can hold the shares and sell later.
Interest paid When you withdraw. Possible gain on shares when you sell. Dividends on shares if you keep them.
Tax Interest on SAYE is tax free. Any gain on the difference between the option and the current price of the shares is free of income tax. If you hold the shares and sell later, there may be capital gains tax on the gain over the market price at the time you bought but this will be no more than 10% after four years.
Fees to pay None.
Passbook SAYE certificate and share option document issued. Share certificate if you buy the shares.
Children Not eligible.
Risk None. Full value of original savings returned on withdrawal. Once you buy the shares, unless you sell at once, the risk is more than with Shares Ordinary Quoted if you only hold shares in one company.
How to invest Your employer must agree to run a scheme and have it approved by the Inland Revenue.
Where from Your employer. From building societies and former building societies which are now banks which all offer an identical SAYE contract (e.g.Abbey National, Bradford & Bingley, Halifax,, Nationwide, Woolwich).