There are calls for a fundamental review of save as you earn (SAYE) and share incentive plans (SIP) to ensure younger generations don’t miss out. Contributor Gabbi Stopp, Head of Employee Share Ownership – ProShare.
Research conducted by ProShare, in partnership with YBS Share Plans, Secondsight and Wealth at Work, shows that Millennials (16 – 37 year olds) often don’t take advantage of share schemes because they think the schemes are outdated, inflexible and unaffordable.
Gabbi Stopp, Head of Employee Share Ownership at ProShare, says: “When SAYE was introduced the aspiration was that it would democratise share ownership, improve employer and employee relations and act as a retention tool. The evidence now suggests that the very features that were originally designed to encourage retention are now discouraging increasing numbers of employees from participating.
“There is a long-established link between employee share ownership, employee engagement and increased productivity. But the length of time that an employee is required to commit to a share plan (for example, 5 years minimum for SIP), and the penalties if she or he doesn’t stay with their employer for this length of time, simply does not match up to the current average tenure for Millennial employees of 2.2 years (compared to 4.4 years average overall).
“24 percent of all non-joiner employees say they don’t join their company’s SIP because they wouldn’t be there long enough to benefit from it. This figure leaps to 48 percent among Millennials and 50 percent among employees with less than one year’s service.
“To ensure both employers and employees continue to benefit from share ownership we need to remove some of these barriers to entry, introduce more flexibility and promote the benefits to young workers,” she said.
Sharesave schemes in particular get people into a regular and committed pattern of saving: made accessible by a low minimum monthly saving of £5 made easy by salary deductions at source made safe, with considerable protections up until the point that those accumulated savings are used to invest in discounted shares. Many Sharesave participants make more than their average annual salary from just one profitable maturity.
Ian Bird, Business Development Director, Secondsight, said: “This research has come at a key time and emphasises the need for change. SAYE is an important savings tool, and through a combination of flexibility, education and good communication I believe we can reverse the current trends this research and report highlights.”
Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace comments:
“It comes as no surprise that one of the main barriers to participation in share schemes is affordability. That is why financial education is a crucial component before launch.
“Financial education can not only help employees understand how they can cut costs and save money in order to be able to afford to contribute, but it can also inform employees about the various benefits of the different types of share schemes and key considerations to think through such as levels of risk and tax treatments.
“For example, employees can learn about linking a SIP with a pension to benefit from double tax relief; or they can discover how to shelter SAYE gains from tax by linking to an ISA. This encourages longer term saving which can result in greater financial wellbeing, and in turn, improve employee retention.”
Martin Nellist, Client Experience Manager at YBS Share Plans, said:
“Share plans such as those offered by YBS Share Plans can be a savings and investment lifeline to many of our customers and for 35 percent of our Sharesave participants it is their only form of saving. The career life cycle of the modern British workforce is very different to when these plans were first conceived.
This research highlights the need to review key features such as the five year tax free anniversary and three year holding period to ensure these plans remain relevant to and valued by future generations as people move roles and jobs more frequently in the 21st Century.” 1.4 million employees participated in Sharesave The average monthly contribution to Sharesave per participating employee was £156. That’s an average of £218 million saved in total each month.