Share ownership on the up?

ifs ProShare, a not for profit membership organisation concerned with employee share ownership, has released the results of its annual SIP (Share Incentive Plan) and SAYE (Save As You Earn) survey. The 2006 survey covered over 95% of UK companies operating an SAYE plan and more than 50% of companies offering a SIP.

One of the most interesting revelations from the survey was the apparently neutral effect of 2005 accounting changes to employee share plans. As Fiona Downes, Head of Employee Share Ownership at ifs ProShare, puts it: "The new accounting standard IFRS2, which had a big impact on executive remuneration, appears to have made little difference to all employee share schemes, with only 0.6% of SIP companies and 0.5% of SAYE companies making amendments to their schemes as a result of the new measures."

Introduced in 1980, SAYE involves the purchase of company shares with the proceeds of savings made under a special SAYE savings contract for a period of 3 or 5 years. The employer can discount the price of the shares by up to 20% off the market value.

Over 2.5 million employees are participating in a SAYE scheme in the UK and the 2006 survey results show that the average monthly saving per employee in 2006 was £61.18. As with the last survey in 2004, most employees (approximately 70%) opt to save into a 3-year savings plan.

The survey also revealed that over 80% of companies operating a SAYE scheme gave their employees the full 20% discount on the purchase of their shares.

Meanwhile, Chancellor Gordon Brown introduced SIP in 2000. Under this plan employers can give up to £3,000 worth of free shares per annum to employees free of income tax and National Insurance.

Employees can buy partnership shares from their pre-tax salary subject to certain limits, again free of income tax and NICs. Furthermore, employers can also give employees up to two free shares for each partnership share the employee buys.

Downes said: "The ifs ProShare survey results confirm that employers are not using SIP instead of SAYE its an additional share plan, not a substitute."

Each employee participating in a SIP makes an average monthly purchase of company shares ranging from £58 to £88 depending on the company. 22% of companies match the shares their employees buy on a 2 for 1 basis but the largest share matching is on a 1 for 1 or Buy one Get One Free basis (34% of companies).

Downes concluded: "UK companies operating a SIP continue to be generous in matching the shares purchased by their employees and we sincerely hope this trend continues, benefiting millions of employees across the UK."

18 June 2007 © Moneyextra.com

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