What is a Save As You Earn (SAYE) scheme?

If your employer has offered you the chance to join a Save As You Earn (SAYE) scheme, you might be wondering whether it’s worth considering.

A SAYE scheme, also known as a Sharesave scheme, is a tax-efficient employer share scheme. It gives you the opportunity to buy shares in your company at a fixed price in the future. In many cases, you won’t pay Income Tax or National Insurance when exercising your option, although Capital Gains Tax may apply if you later sell the shares and make a gain.

Get updates on markets, ISA funds, pension saving and much more

How a SAYE scheme works

A SAYE scheme lets you save between £5 and £500 each month across all your current SAYE savings contracts through payroll deductions. The money comes from your take-home pay and is paid into a special savings account linked to the scheme.

The payments are taken over a fixed term during which you’ll usually save for either three or five years. When the savings period ends, you can use the money you’ve built up to buy shares in your company at a price that was fixed when you joined the scheme.

This is known as the ‘option price’ or ‘exercise price’. Think of it as a guaranteed price for your shares, even if the market value has increased.

You can also choose to take your savings as cash instead of buying shares, for example if the market price at maturity is lower than the SAYE price.

What happens when the scheme ends?

At the end of your three- or five-year scheme, you can choose from several options:

• Buy some or all of the shares

Buy and keep – use your savings to buy the shares and keep some or all of them. Their value could rise or fall over time.

Buy and sell – buy the shares at the option price and sell some or all of them immediately. If the market price is higher than the option price, you may make a profit.

Buy and transfer – purchase the shares and transfer them into an ISA or pension, subject to the relevant rules, options and limits.

• Take your money back

Take your savings back and any interest you’ve earned. This means you don’t buy any shares.

What are the benefits?

• Tax advantages – provided the option is exercised under the tax-advantaged SAYE rules, you will not normally pay Income Tax or National Insurance on the difference between the option price and the market value of the shares at exercise.
• Potential for future growth – the option price is fixed when you join the scheme and may be lower than the market value of the shares. If the share price rises during the savings period, you could buy shares at a discount.
• Limited downside risk – if the share price falls below the option price, you don’t have to buy the shares. You can simply take back the money you’ve saved.

Transferring shares into an ISA or pension

ISA transfer

You can transfer shares acquired through a SAYE scheme into a Stocks and Shares ISA. You must complete the transfer of SAYE shares into your Stocks and Shares ISA within 90 days of exercising your option and acquiring the shares.

The market value of the shares on the date they are transferred counts towards your annual ISA allowance. You can only transfer them if you have enough remaining ISA allowance.

Your ISA provider must agree to accept the transfer. Some providers may need specific paperwork from your share scheme, such as a letter of appropriation, and the tax treatment can depend on how the transfer is made. For example, selling the shares first and then using the proceeds to fund an ISA - sometimes called a Bed and ISA - may be treated as a disposal for Capital Gains Tax (CGT) purposes.

If the SAYE shares are transferred validly into a Stocks and Shares ISA within 90 days of exercising your option, no UK Capital Gains Tax is due on the transfer. Once the shares are in the ISA, later gains and UK dividends within the ISA are generally free from UK CGT and Income Tax.

Pension transfer

HMRC also allows you to transfer shares directly into a pension when the scheme ends. If you don't transfer them immediately, you can usually still transfer them within 90 days. If you transfer the shares directly from your SAYE scheme to a pension, you will not normally be liable for Capital Gains Tax. However, if you first take the shares out of the scheme and transfer them to a pension later, even within the 90-day period, you may make a capital gain and could be liable for CGT on any increase in value.

Transfers at Fidelity

Please note, at Fidelity, we only accept transfers into a Stocks and Shares ISA and don’t support pension transfers. In order to transfer shares into a Stocks and Shares ISA, Fidelity must agree to accept the transfer.

How do I transfer my SAYE shares into an ISA?

1. Your SAYE scheme administrator will let you know in advance when your scheme is coming to an end and will explain your options for what you could do next.
2. To start your transfer, you’ll need to prove the shares were part of a SAYE scheme. Just ask for a ‘Letter of Appropriation’ from your current scheme and send it to your new ISA provider.

Important: If your SAYE or Sharesave Scheme is through Fidelity Stock Plan Services, your option to move your shares into a Stocks and Shares ISA and how you do this will be sent to you automatically at maturity. If you have any questions, you can speak to a Fidelity Stock Plan Services Associate here now.

Please note: Fidelity International and Fidelity Stock Plan Services, LLC are separate companies that operate in different jurisdictions through their subsidiaries and affiliates.