One million people in the UK are part of a share save scheme, but what exactly are they?
An Introduction to Share Saves
You may see share save schemes referred to as Save As You Earn (SAYE) or employee share ownership schemes.
Introduced in the UK in 1980, share save schemes help you save towards buying shares in the company you work for.
For a company to participate and offer this scheme to its employees, it must be (or be owned by) a public company listed on a stock exchange.
How do they Work?
You save directly from your wage and then at the end of the savings period you are given the option to buy shares in your company or take your savings in cash.
The company will give you an option price, which is the price you will be able to buy shares for at the end of the scheme.
You can save up to a maximum of £500 a month under the scheme. The amount you opt to save is then fixed every month. So, if for example, you opt to save £50 a month for the duration of the scheme, you can’t then increase this to a contribution of £200.
The company may set an eligibility period wherein to join the scheme, you must have worked for the company for a minimum length of time.
What do you get?
As we noted earlier, you can take your savings as cash or as shares in the company. However, there are a number of options and combinations as to how you can do this:
Take it as cash. Here, the scheme has been used as a savings account of sorts. With this option, you will get back every penny you put away into the scheme. However, the money will not accrue any interest whilst sitting in the scheme, unlike how it would in an ordinary ISA
Buy and sell the shares. For example, you may choose to do this if the share price has risen above the option price given to you at the start of the scheme, so buying and selling the shares allows you to immediately make a profit
Buying and selling some but not all of the shares
Buying some shares and taking the rest as cash
You have 6 months to make this decision, so you don’t need to choose as soon as the scheme comes to an end.
You will pay no income tax or national insurance on the difference between what you paid for the shares and their value, but you may have to pay capital gains tax if you sell the shares.
What Information should my Employer give me?
Your employer will usually extend an invitation for you to join the scheme a couple of months before it begins. They should disclose the following information to you:
The scheme’s length, which will be either 3 years or 5 years
The deadline for signing up to the scheme
How much you can save each month. Under share save schemes, you can save between £5 and £500 a month. However, your employer may have their own rules, where they have increased the minimum payment you must make, lowered the maximum payment you can make, or a combination of the two
The price you can buy shares for at the end of the scheme. This price is set at the start
Is this Right for Me?
Whether share saves are right for you is a personal decision. If you would only want to take the savings as cash at the end of the scheme period, a savings account is probably a better option for you, as you can benefit from savings growth via interest.
Additionally, if you are struggling with debts or need to focus on building an emergency savings fund, it’s probably worth prioritising this over share saves.
However, if you do have a bit of spare income each month and want a low-risk form of investment, share saves may be a good option for you.
by Red Star Wealth
As we are coming up to a new year, you might be thinking of making some changes to help improve your financial stability and happiness. Let’s have a look at some New Year’s Resolutions you can make to do so…
Prioritise my own Mental and Financial Wellbeing
Don’t stretch yourself too thin in order to please or impress other people. You are the main character in your own book of life!
Improve my Credit Score
A good credit score means you are more likely to be approved for loans and be offered lower interest rates on repayments. This resolution is particularly worth considering if you are thinking of getting something like a mortgage in the next few years. Some examples of steps you can take to improve your credit score are registering on the electoral roll and paying your credit card balance in full every month
Pay off More than the Minimum Payment each Month on my Credit Card
Even if you don’t pay the full balance, paying for than the minimum required payment is a good idea. This is because you reduce the amount of time you will be stuck making repayments and being charged interest. We talk more about credit cards on our sister company’s blog…
Increase my Pension Contributions
Pensions work on a system of compound interest so the earlier you start building your pension pot, the more it will be able to grow over time. If you are able to, increasing your pension contributions is definitely worth considering, especially if you are a woman… let’s close that gender pensions gap!
Build my Savings
Whether you’ve got something in mind you want to save up for or just want to create an emergency fund, savings are really important. LINK It sometimes seems impossible to save money because we think ‘too big’. For example, you might have a goal to save £1,000, but it seems unmanageable. However, when we break it down in terms of the amount we would need to save each week or month, it seems less daunting and more achievable. Maybe you could start by getting an un-openable tin money box, or enabling the round up transaction feature on your online banking if your bank offers this
Don’t open any New Credit Cards
Try not to increase your debt!
Tackle my Debt
Is 2023 the year of going debt free? One way of managing your debt is to pay off the ones with the highest interest rates first, in order to slow the rate of growth of the money you owe. It’s also worth checking out:
You are worthy and capable of achieving what you want in life. Keep working towards whatever that may be…
by Red Star Wealth
According to The Money and Pensions Service’s Financial Capability Survey, 11.5 million UK adults have less than £100 in savings and only 49% of people could last 3 months or more without borrowing money if they lost their main source of income.
Why Might You Struggle to Save?
It’s difficult to save money if you have any debts because you are tied into making repayments.
It’s also difficult to save when you don’t have a budget plan as it’s harder to keep track of your money. Budgeting can help you see where you might be able to reduce your spending and where (if possible) you can afford to put money into savings. Use our free budget calculator through our sister company’s website if you need some help making your budget!
It’s hard to save money if you have a habit of overspending. It can be easy to spend beyond our disposable income, especially at times like Christmas…
The Cost of Living Crisis
UK savings will likely only decrease in continuing months. This is because many people cannot afford to save money at the moment, giving the huge inflationary pressure on living expenses.
You can only afford to save money when your expenses are more than your income. Therefore, many people might see their savings slowly being depleted, the growth of their savings coming to a standstill, or their savings’ growth slowing down.
Why is Saving Money so Important?
It enables you to achieve your financial goals
You can form an emergency fund for any unexpected expenses. This in turn gives you security and peace of mind as the emergency fund acts as a safety net so that you can afford to cope with the unexpected
It can help you avoid taking out credit, protecting you from entering a cycle of debt. This point is particularly true when considering how many people turn to things like payday loans when they have unexpected bills
It means you can accumulate wealth, which is good if you want to do something like channel money into an investment
It helps protect your credit score as you can make payments on time
If saving for a house, it means you can put down a bigger deposit, meaning you will have a smaller mortgage with more competitive interest rates
We know that it can be really difficult to save money when the price of everything constantly seems to be on the increase. Sometimes saving is not a viable option, as you may simply not have any spare cash to put away. However, if you are able to, building your savings is certainly worth considering…
by Red Star Wealth
Though the Bank of England has not officially predicted a recession later this year, it is looking increasingly likely. This is due to the huge increases in the rate of inflation and the labour shortages continuing from Brexit and Covid. Here are some ways of preparing your personal finances in case a recession takes place.
Save, save, save
It may be a good idea to start building up your savings account, wherever possible. Having a strong emergency fund means you are prepared for unexpected costs. You never know what’s round the corner so it is best to prepare for the worst and expect the unexpected.
For example, your income may reduce from either losing your job or having your hours cut down due to less consumer demand in the economy. This would make essential payments harder to deal with, especially those arising out of the blue, such as your car breaking down or your bills rising (the latter being incredibly likely at the moment).
Go Debt Free
Try to pay off existing debts wherever you’re able to. Consider making a debt repayment plan… this could involve paying off priority debts first, before focussing on the ones with the highest interest rates in order to save money on interest repayments.
Priority debts are things like gas and electric bills and mortgage arrears (missed mortgage payments). These debts should be prioritised as they have the potential to cause the most issues, such as having your electricity cut off, or losing your home.
Avoid taking on any extra debts as you don’t want the amount you owe to become unmanageable
Shop Around
You can try to reduce your expenses by switching to cheaper options. Even though switching accounts can be a pain, it’s worth it in the long run.
If your weekly shop costs a bomb, maybe try to find a cheaper supermarket and cut down on certain luxury goods. If there’s ever a time to be frugal it’s now.
Avoid Investment Panic
Don’t let panic affect your investment choices. You shouldn’t let emotion cloud your judgement. Your investments dropping in value in the short-run during a recession does not mean they lack long-run profitability. For more info on this, check out this previous blog on the importance of long run investment.
It’s also worth considering diversifying your investments now so that one industry facing a decline during recession doesn’t sink your whole portfolio.
