TESCO employees are set to be up to £20,000 better off, thanks to the success of the supermarket’s Save as You Earn share scheme.
And Tesco isn’t the only company offering this sort of Sharesave scheme, major brands such as Asda, Tesco, BT, and Next have all run them for their employees.
In fact, the most recent government figures show that 19,990 companies in the UK have the schemes available, with more than a million people taking part so far.
However, the schemes are not always well publicised or understood. Here’s what you need to know.
A sharesave scheme is where the company you work for offers you shares as a reward for working there.
Some of the schemes have special tax privileges, which means you won’t pay income tax or national insurance (NI).
There are four main types called Share Incentive Plans, Save As You Earn (SAYE), Company Share Option Plans, and Enterprise Management Incentives (EMIs).
However, EMIs and Company Share Option plans do not have to be offered to every employee, and so are less widely available.
Whereas if your company runs a Share Incentive Plan or an SAYE, you should be able to access it.
This allows you to regularly buy shares in your company.
If you keep the shares in the plan for five years you won’t pay income tax or NI on them.
There are rules about how many shares you can get and how much you can spend.
Your employer can give you up to £3,600 of free shares every tax year.
You can buy shares out of your pre-tax income, up to a limit of the lower of 10% of your income or £1,800
Your company can also give you up to two free shares for each share you buy.
Some schemes allow you to reinvest dividends you receive into buying more shares.
You might have to pay capital gains tax, but you can avoid this by either keeping the shares in the plan until you sell, moving them to an ISA from the plan, or moving them to your pension when the scheme ends. Alex King, founder of Generation Money, says: “Under a Share Incentive Plan the big plus is that you’ll usually get free shares from your employer…
“If you hold the shares for 5 years, not only will you avoid income tax and National Insurance on them but if you sell them from the scheme, you will also avoid Capital Gains tax.”
Save as you earn allows you to buy shares at a fixed price, discounted by up to 20% compared to the market value at the time.
You can save up to £500 a month, and at the end of the scheme, which will be either three or five years later, you can use the money to buy the shares.
If the share price has stayed the same or risen, you’ll have made a nice profit, but even if prices fall, you’ll still have all the capital you saved.
The Tesco scheme is a good example of this type of share initiative.
The interest and any bonus money at the end is income-tax and national insurance free.
You can also avoid Capital Gains Tax by transferring the shares to an ISA or pension when the scheme ends.
Clare West, finance editor at Investinginsiders.co.uk says: “Buying shares means needing a lump sum of money to invest. If you don’t have that kind of money readily available, then a share save scheme can help you build up your savings over time – usually three or five years. It’s run by your employer, so the earmarked money is deducted straight from your pay packet.
“People often worry that with a share save scheme, their money will be locked in and if they change their mind or need to withdraw the money, it will be too late. However, that is not the case: you remain in control of where the savings – plus the interest that you’ve earned – ends up
To take part in a share save scheme, your company must be (or must be owned by) a public company listed on a stock exchange.
Not every listed company has a scheme, but it’s worth checking, especially if you work for a larger firm.
King says: “When you join a company you should be informed of any share schemes that you’re eligible for, and all staff must be offered the same terms. This is often by post so make sure to check any letters you receive from your employer.
“If you’re unsure whether your company offers a shares scheme you should contact your HR team as they usually manage share schemes on behalf of the company.”
Company share schemes don’t have many downsides, but they’re probably not a good idea if you have lots of debt, or if you struggle to make ends meet each month.
West says: “However much you could potentially make as a shareholder down the line, paying off debts – and not building them up in the first place – should always remain a priority.”
You also might want to avoid them if you’re thinking about changing jobs; leaving won’t mean you lose the money you’ve saved, but you might no longer have the right to buy the discounted shares.
West concludes: “Terms and conditions vary from employer to employer, but you may still have access to discounted shares, if you’re made redundant or you retire, within a certain time period after leaving. If you leave for other reasons, that is unlikely to be the case.”
Many of us are still struggling with the high cost of living - but there's help you can get.
New or expectant parents can get up to £442 a year to spend on food through Healthy Start scheme.
Some new parents can get £500 via the Sure Start Maternity Grant. The money is designed to help you cover the costs of having a child.
Councils also offer support through the welfare assistance schemes, to help cover the costs of essentials, from buying new furniture to food vouchers.
The amount you can get varies but an investigation by The Sun found that hard-up Brits can apply for help worth up to £1,000.
Discretionary Housing Payment is a pot of money handed out by councils to those struggling to keep a roof over their heads.
A scheme is available for those who find themselves unable to cover housing costs, though the exact amount varies as each local authority dishes out the cash on a case-by-case basis.
Many energy forms offer grants to help cash-tight customers. The exact amount varies depending on your supplier and you circumstances, but could be as much a £2,000.
