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SIPs - Great For You, Great For Your Employees

Friday, 12 January 2018

Graham Bull, Head of All Employee Share Plans, looks at key benefits of Share Incentive Plans to both employers and employees

Through 2017, the UK economy experienced growth with GDP rising and increases in the number of people in work; employment remained high with unemployment at its lowest rate since 1975. However, higher inflation, the first increase in the official bank rate since July 2007 and the prospect of higher mortgage interest payments put pressure on our ability to save, both for the short and long term.

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Employee share plans can reinforce a savings culture by encouraging employees to save and invest in their company’s shares. The two all-employee UK tax advantaged share plans, Save As You Earn (Sharesave) and Share Incentive Plan (SIP), encourage employees to save money directly from their salary, providing both an easy way to invest in their employing company as well as valuable tax benefits.

In this, the first of two articles looking at tax advantaged share plans, we look at financial and non-financial benefits of SIPs

Great for your employees…

Partnership Shares are a key component of SIPs and give employees an opportunity to purchase their company’s shares from gross pay, meaning that basic rate tax payers can enjoy a 32% saving from Income Tax and National Insurance Contributions (NI) with even greater benefits for higher rate tax payers. Although there is no minimum holding period for Partnership Shares, employees usually receive full tax benefits after the Shares have been held for five years.

SIP provides savings flexibility as employees can join, stop or change the amount they invest each month in Partnership Shares.

In 2017, Metro Bank launched a SIP for their employees, called ShareBuy, and Deborah Wills, Director of Reward and People Operation of Metro Bank shares her thoughts of the plan and benefits it has for their employees.

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“At Metro Bank we want our colleagues to share in our success. That’s why we don’t just offer all colleagues share options, but launched our new ShareBuy scheme, managed by Equiniti.

This gives our fast growing colleague-base the opportunity to buy Metro Bank shares and benefit from a tax discount on the share price. What’s more, we’re proud that the take-up of our Partnership Share scheme is over 10%, with many colleagues choosing to invest their annual allowance up-front, showing the strength of belief in our vision.”

…And great for you

As deductions for Partnership Shares are taken from gross pay there are financial benefits to you as an employer with 13.8% NI savings on SIP contributions made by employees. In addition to benefiting from NI savings and employee engagement, the scheme has an overarching effect on various business areas. As well as managing other companies’ plans, Equiniti provides a SIP to its employees. Our own Equiniti business divisions, as well as our Chief Executive, share their thoughts…

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John Stier, Chief Financial Officer says, "Our SIP is a really great scheme to reach full goal alignment with our teams and shareholders. The tax breaks are superb making this one of our best ways as a business to align stakeholder interests in Equiniti. We have also saved substantial national insurance costs as a company that has meant a net benefit to the company's finances.”

Nicky Pattimore, Group HR Director explains:


The Share Incentive Plan is a great way to encourage employee share ownership. The introduction of Matching Shares in 2017 made the SIP even more attractive to our employees who now, for every three Partnership Shares they purchase, receive two free shares on the first £180 they invest annually. Our take-up increased significantly as a result of relaunching the SIP with a Matching Share element.”

Guy Wakeley, Chief Executive says:


Share ownership is a powerful means to align the interests of colleagues with those of investors, and to create real energy and excitement around business performance and prospects. Currently more than half of Equiniti colleagues are investors in the company, and I want to ensure that everyone can participate in future success as engaged shareholders.

SIP participants can invest a monthly amount ranging from a minimum of £10 to a maximum of £150 and/or make a lump sum payment(s) of up to £1,800 per tax year or 10% of their gross salary – whichever is lowest. Participants pay less Income Tax and NI each month as contributions are from gross pay, providing an effective discount of up to 32% off the market value of shares for basic tax payers and 42% for higher rate tax payers.

Other plan elements include Matching, Free and Dividend Shares. To receive full tax benefits, employees usually need to hold Shares for five years and as share prices can go down as well as up, Partnership Shares are regarded as a longer term investment.

National statistics provided by HMRC show that there are nearly eight million awards/purchases of SIP shares to employees annually. The statistics really demonstrate the level of financial benefits employers and their employees can enjoy with an estimated annual SIP cost to the Exchequer being an impressive £290 million.

Equiniti manages 1.2 million employee accounts and 57% of all SIP accounts. We can help companies interested in launching a plan through our experience, established processes, careful design and effective communication. If you would like further information and an estimate for the NI savings that your company could realise through implementing a SIP, please contact your Relationship Manager.