Helping staff members put money aside for the future doesn’t have to stop with pensions auto-enrolment. Sonia Rach looks at a number of other savings options
As the New Year gets under way, many people will be starting to think about putting money aside, and most organisations will want to help their staff to do this.
Share save schemes
Jeanette Makings, head of financial education at Close Brothers, says: “A number of companies, particularly those that are listed, offer some sort of share scheme. This is suitable for everyone, and is potentially a good way to build up savings.”
There are several different types of scheme. Share Incentive Plans (SIPs) are one way in which employees can invest in shares in a plan for five years without having to pay income tax or National Insurance on the values.
Louise Drake, national sales manager at YBS Share Plans, adds: “Share save is something to offer all employees. Our research shows that 65% of those saving only in share save say that if it didn’t exist, they would spend most or all of their contribution. It’s encouraging people to save from their salary. Finding a savings vehicle can be difficult, but if it’s direct from your salary, it works well.”
Other savings-related schemes include Save As You Earn (SAYE), where shares can be bought with savings for a fixed price. Interest and any bonus are tax free.
The Company Share Option Plan is an alternative that allows employees to buy up to £30,000 worth of shares without paying income tax or NI contributions on the difference between what was paid for the shares and what they are worth.
The same tax rules apply to Enterprise Management Incentives (EMIs), in which staff can buy shares of up to £250,000 if they’re working for a company with assets of £30m or less.
Makings describes saving through a share scheme as one of the most risk-free methods. “If that share price has risen over that savings period employees can cash them out as shares to benefit from that profit, and if the share price hasn’t risen, they can get that money back.
“People quite often use that to build up medium-term savings, some use it to replace their cars, for their general savings pot or to top up their pension because you can transfer the savings from a share-based scheme within 90 days into a qualifying pension – subject to your annual limits.”
Individual Savings Account (ISA)
Questions have been raised around the future of pensions as there are now two types of ISAs to distract younger savers: the Help-to-Buy ISA and Lifetime ISA.
Help-to-Buy ISAs are offered by banks and allow first-time buyers over the age of
16 to save. It is designed to help young people save and gives them an extra 25% on everything they contribute. Similarly, the Lifetime ISA, due to launch in April, will allow young individuals to save towards either retirement or to buy a property.
Communication and engagement
It is crucial that employees are aware of the importance of saving. Makings says: “Financial wellbeing isn’t just about debt. People worry about money at every stage and at every age. Financial education has a significant role because it can tie together so many benefits and it’s the key that unlocks the value across the benefits.”
Drake adds: “It’s not necessarily a financial return, but you have a more engaged workforce. The key is having a mix of communication methods to get that information across.”