Helping employees understand their maturing sharesave options – how drax achieved it.

https://www.youtube.com/watch?v=nlr8h_fa4bA

WEALTH at work have recently supported Drax employees to understand their options when their Sharesave plan reached maturity. See our case study on how this was achieved and what the results were.

Background

Drax Group plc, a FTSE 250 renewable energy company, has offered Sharesave plans to their employees for around ten years. The plan allows employees the opportunity to buy Drax shares at a discount of 20% to the actual market value, meaning they can potentially be in line for a significant increase in value when the shares reach maturity if the share price has risen over the savings period.

This was the case when its 3 year 2020 Sharesave plan, which had 950 participants, matured on 1 June 2023. The option price was £1.27 and when the shares matured three years later, the share price had increased to over £6, which represented a gain of 372% per share! However, this gain meant anyone saving around £45 per month, or more, over the 3 year period could be at risk of exceeding the Capital Gains Tax Allowance (CGT) for the 2023/24 tax year of £6,000.

Drax wanted to ensure that all its share plan participants understood CGT and the choices available to them at maturity so that they were equipped to make informed decisions on what to do with their shares, including how to best mitigate their tax liability.

The solution

Drax partnered with WEALTH at work to develop a financial wellbeing programme tailored to meet the needs of their share plan participants. This involved engaging with Drax’s workforce engagement forum and other internal and external stakeholders to ensure the content and support was easy for employees to understand.

There were 3 elements to the financial wellbeing support which were facilitated by WEALTH at work, including:

1. Financial education seminars and digital support – Participants were provided with access to face-to-face and online financial education seminars, with the focus of these being to explain to employees what choices they have for their maturing shares, how CGT works and ways in which they could mitigate a CGT liability. For example, they learnt about how they could transfer some shares to their spouse (to utilise their CGT allowance), transfer up to £20k worth of shares to a stocks and shares ISA, or sell shares across different tax years to mitigate tax. Further, the online seminars were recorded and made available on demand on the employee micro-site, alongside a video which explained how CGT works. This method of providing a range of financial education ensured the information was accessible to a wide range of employees in their preferred learning style and supported different working/shift patterns.
2. Telephone helpline – Following the seminar, all participants had access to a telephone helpline and could request a call back from a financial coach who can provide guidance and help address any questions they may have.
3. Regulated financial advice – For those participants who want to understand their personal financial situation and receive bespoke support, a regulated financial advice service was also available.

The financial education seminars had a great take-up and over 82% of participants who registered for a seminar attended them. Results collated after the seminars indicated that there was a significant improvement in employee’s knowledge. On a scale of 1 (lowest) to 5 (highest), attendees on average, rated their knowledge as 2.93 before the session and 4.20 after it. Further to this, the average score for those who indicated that they would take specific financial actions following the session was ranked as 4.51 out of 5, and 4.59 out 5 said they would recommend the session to a colleague. Additionally, 79% of those who attended a session requested further guidance from a financial coach.

To date, over 88% of participants have taken some sort of action to mitigate tax, such as transferring shares to a spouse or ISA, or selling some shares up to their CGT allowance and holding the balance.

Nigel Youds, Deputy Company Secretary, Drax, comments; “Drax is very supportive of employee share ownership, recognising that it is a powerful way to engage colleagues, help them feel enthusiastic about delivering the company’s goals, and aid retention. For many colleagues, the sums involved in this maturity were potentially life-changing, and the programme was a hugely valuable way of supporting colleagues to help them better understand their choices and make the most of the options available to them at maturity.”

Jonathan Watts-Lay, Director, WEALTH at work, comments; “Financial wellbeing support is a must given the enormity of the decisions that employees face when it comes to share plans maturing and it’s great that we have been able to help Drax’s employees with this.”