Government slashes SAYE bonus rates
Mar 20 2009 by John Cranage, Birmingham Post
The Government has cut the bonus rates paid on employee savings schemes following recent interest rate falls.
The Treasury is reducing the rates paid through Save As You Earn (SAYE) scheme bonuses by more than half in some cases.
It is estimated that around five million UK employees belong to SAYE schemes, under which staff can save between £5 and £250 a month for three or five years.
At the end of the period they receive a tax-free bonus, which is added to their savings, and they can either take the money as cash or use it to buy shares in their company, usually at a discount of up to 20% of the share price when they first entered the scheme.
The Treasury said today that the bonus rate paid on three-year schemes was being cut to the equivalent of 1.08 per cent a year, down from 2.67 per cent, while the rate for five-year schemes will drop to 1.67 per cent from 3.04 per cent.
People who opt to leave their money in the scheme for an extra two years after a five-year scheme finishes will receive an annual return of 1.98 per cent, compared with 3.2 per cent previously. The early leavers rate, for people who withdraw their money ahead of the scheme maturing, will fall to 0.5 per cent from two per cent. The bonus rates paid on the schemes were last changed on December 27, and the Bank of England base rate has fallen by a further one per cent since then. The new rates will not apply to people who are already members of the scheme, but only to those who join now.
