Sharesave schemes were introduced by the Conservative Party in 1980, to widen share ownership, enable workers to have a stake in their company, align their interests more closely with those of their employer and, perhaps most importantly from the employee’s perspective, to provide a safe and relatively risk-free means of saving and investing.
More than 30 years on, schemes still meet all those original objectives, as evidenced by the fact that more than a million employees are currently investing in a sharesave plan.
However, with age comes the need for some tender loving care. Over the past 20 years, governments have failed to increase the amount of money employees can save in a sharesave scheme. They remain a popular choice, but for those able to save a bit more, they are losing their allure.
The savings limit is £250 a month, which has not increased since 1991. If this savings limit had risen in line with inflation, it would be £450. The government should raise the monthly limit and make sure it increases in line with inflation each year. Individual savings account (Isa) limits increase every year, so why not share plans?
The Office for Tax Simplification (OTS) has made some other recommendations to simplify and update sharesave plans, including removing the seven-year sharesave plan (used by 0.5% of sharesave savers) and allowing employers to self-certify their share plans rather than seeking approval from HM Revenue and Customs.
As the voice of the UK’s employee share ownership industry, and having sat on the OTS consultative committee concerned, we support the recommendations. The government will consider these and report back in the autumn.
– John Collison, head of employee share ownership at IFS Proshare