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Share Schemes - Read the Small Print!

Clients often ask us how employee share schemes can help boost their pensions, so we've produced a short guide to the different types of share schemes.

The schemes, which are a way of getting free shares or gifted shares to provide an incentive to stay with an employer long term, can be split into the following categories:

Save as you earn (SAYE) – employees enter a savings contract for a period of several years. At the end of this period, they receive a tax-free bonus on their savings.

Company share option – employees are offered the chance to buy up to £30,000 worth of their company’s shares at a fixed price.

Enterprise management incentives – companies with assets under £30m and that have fewer than 250 employees can grant employees share options of up to £250,000 across a 3 year period.

Profit-sharing schemes – the profits of a company are placed into a pot, and is paid as a lump sum between employees as a percentage of their annual salary.

Share incentive schemes – These plans allow employees to own shares in their company, creating tax and national insurance savings. There are several different types of SIP, such as:

  • Free shares

  • Partnership shares

  • Matching shares

  • Dividend shares

Not all companies are able to set these up, so it’s worth looking into what you can do.

The different schemes have different tax implications and, as such, they can be a great way to earn in a tax efficient manner.

However, some can be awarded at ‘nil value’, which means that the full value of the shares will be liable to income tax at the point in which they are sold. This could, in turn, adversely impact your pension annual allowance.

This is a complicated area, with share schemes having both advantages and disadvantages. You should seek advice before selling down any shares within a share agreement to ensure you know the knock-on effects.

This article is for information only and should not be seen as advice or a recommendation to take action. Investments can go down as well as up and you may not get back the original capital invested.


The contents of this post are not intended as and should not be taken as advice. Any actions taken on your financial products may be irreversible and could negatively impact your financial planning, so we recommend seeking personalised financial advice before acting. Investment performance is not guaranteed, past performance is not an indicator of future performance, and you may get back less than your original investment.

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