Change in Bonus Rates for SAYE Share Option Schemes
Changes are being made to bonus rates for Save As You Earn (SAYE) Share Option Schemes (sometimes referred to as ‘Sharesave’) that will maintain them in line with other interest rates.The bonus rates were last changed on 17 February 2009.
The new bonus rates effective from 29 May 2009 will be:
| Contract Type | Bonus Rate (Previous rates in brackets) |
Annual Equivalent Rate (Previous rates in brackets) |
|---|---|---|
| 3 year |
0.3 x monthly payments (0.6) |
0.54% (1.08%) |
| 5 year |
2.2 x monthly payments (2.6) |
1.42% (1.67%) |
| 7 year |
5.2 x monthly payments (5.6) |
1.84% (1.98%) |
The Early Leavers’ Rate will change from 0.5% to 0.36%.
Employees who are already saving under existing SAYE contracts are not affected by these rate changes.
Bonus rate mechanism
Bonus rates are set by a mechanism agreed with the savings providers.
The rates for 3-, 5- and 7-year SAYE contracts are adjusted automatically by linking them to 3, 5 and 7-year market swap rates. The market reference swap rates are the average of the respective market swap rates over the period of 10 working days ending on 29 April 2009.
The bonus rates are adjusted to maintain the following gaps under the market reference swap rates:
| Contract type | Basis point margin under market swap rate |
|---|---|
| 3 year |
2.05% under 3 year market reference swap rate |
| 5 year |
1.75% under 5 year market reference swap rate |
| 7 year |
1.65% under 7 year market reference swap rate |
The mechanism allows for bonus rates to be adjusted if the market reference swap rates move more than a certain amount. This adjustment is triggered if the three or five year swap rates (measured as an average over a rolling 20 working day period), are equal to or greater than 0.5 per cent below or above the levels used in setting the previous rates.
If this trigger condition is met, the bonus rates are reset to maintain the 2.05 per cent, 1.75 per cent and 1.65 per cent gaps under the new reference swap rate as appropriate, which is the average swap rate over the last ten working days of the 20-day period. These bonus rates will then apply until the market reference swap rates move far enough for the trigger condition to be met again.
If the trigger condition is met, the Early Leavers’ Rate is also changed in order to ensure that it gives a fair return to those who do not wish to or are unable to carry on for a three-year period, and so do not qualify for the standard scheme bonuses and benefits, while maintaining an effective incentive for continued participation in the scheme.
Further information
There is more information about employee share schemes, including SAYE,
on the HMRC website at HMRC Share Schemes.
Please email comments or questions about changes in SAYE bonus rates to Share
Schemes.
