Why You Should Buy Into A Workplace Sharesave Scheme

When I got my first job in 2005 I’d never heard of the phrase sharesave scheme. And 15-year-old me didn’t really care what it was. Workplace savings would generally mean your pension, but now there are other tax-efficient options to both save and invest. And workplace sharesave schemes have been great saving and investing tools for me over the years.

What is Save As You Earn (SAYE)?

Save As You Earn (SAYE) is a monthly saving scheme that is set up by an employer and offered to employees who have been with the business over a certain amount of time. The share price is set at the beginning of the scheme and this is generally slightly lower than its current value at the time.

You can save up to £500 a month while the scheme lasts which is generally three or five years. And the money comes instantly out of your pay (before tax) much like your pension contributions. At the end of the scheme, a tax-free bonus is added to your savings and you have two options. You can either use the money to buy shares in the company, or you can just withdraw the money as it is. So even if the companies shares have taken a nosedive you can still withdraw all the money you’ve saved.

If you choose to buy shares you can then instantly sell them and hopefully, make a profit. This is a great option if you got a low set price for shares at the beginning of your sharesave scheme. Or if the shares have massively increased in value.

Alternatively, you can buy them and keep hold of them.

Other forms of sharesave schemes

There are other less common sharesave schemes out there that fall under the term Share Incentive Plans (SIPs). There are a few different forms of SIPS including:

• Gifted shares- Some employers will gift staff shares and this can be up to the value of £3,600 in the tax year
• Buy as you earn (BAYE)- Otherwise known as partnership shares where you can just buy the shares directly from your pay. Although with this option you may need to look into the individual rules within your business. If you’re in a certain type of role you may not be able to buy shares in the company
• Share-matching- This is when for each share you buy yourself, your employer can give you up to two free shares
• Dividends- If you receive dividends from your shares, you can use them to buy more shares

My experience with workplace sharesave scheme

I’ve been part of sharesave schemes with three different employers now; my first being when I was about 18/19. I didn’t know a lot about my sharesave scheme back then. But it seemed like a good way to save money which is something I hadn’t been doing up until then. At the time I went for my company minimum which was £50 a month and boy do I regret not doing more. When I bought these shares it was during the recession around 2008 so share prices were very low. When I went to buy and sell them three years later I’d turned my rough pot of £2,000 into about £9-10,000.

Imagine how much I’d have made if I’d saved £200 a month!

While at this employer I also set up a second SAYE when it re-opened the following year, so for a while I was paying into two sharesaves which is totally allowed by the way. When I was at ASOS I also did the employee SAYE scheme. After the first year shares were lower than they had been so I withdrew the money early (and just missed out on the bonus) and re-signed up so the set share price would be lower when I came to buy and sell. Now I didn’t end up staying with the company long enough to get to that point. But after 2020 I don’t think the share value would have gone up too high.

Have you ever paid into a workplace sharesave scheme or SAYE?

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