Making complex things simple

Impact of SIP and SAYE limit changesWas it really worth all the fuss?

Presented by Phil Ainsley andJennifer Rudman

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Introduction

Phil AinsleyDirector, Employee Services

Overall responsibility for Employee Share Plans and Benefits Administration.Role encompasses all Equiniti’s employee benefit solutions that include equity reward administration alongside Flexible Benefits and Total Reward Communication

Jennifer RudmanStrategic Development Manager, All Employee Share Plans

Overall responsibility for defining Equiniti’s all employee share plan strategy and enhancing its employee share plan services

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Impact of SIP and SAYE limit changesPresentation coverage

Outcome and trends The session will look at what changes were expected using feedback gathered from an earlier survey and comparing this with the reality of what has happened since April, analysing investment levels to show outcomes and trends Drawing on a variety of company case studies, we’ll show how changes were implemented, specific impacts felt and what we expect from SAYE and SIP going forward

Small ripple or big splash?After waiting 23 years for Sharesave savings limits to change and 14 years for SIP, was it really worth all the fuss? Small ripple or big splash?

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Last increase to SAYE limit was in September 1991SIP has retained its monetary limits since its introduction in 2000

Changes in April 2014

Limit change

SIP Free Shares

The amount of Free shares which an employee can receive in a tax year rose from £3,000 to £3,600

SIP Partnership SharesThe amount of savings which an employee can make for Partnership shares each tax year increased from £1,500 to £1,800 (or to £150 a month)

SAYE

The maximum monthly amount which can be saved doubled from £250 to £500

SIP Matching SharesThe amount of Matching shares is linked to the amount of Partnership shares (max 2:1) so increased from £3,000 to £3,600

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Analysis of SAYE launches since April 2014

Launches and maximum savings limit used

SAYE limit increase

SAYE limit change• Survey showed 54% of

companies intended to increase the monthly savings limit to £500

• 6 companies delayed their ‘usual’ launch date so the higher limit could be used

• 26 of the 30 companies that completed SAYE invitations between 6 April and August 2014 increased their savings limit (87%)

• 24 of the 30 companies increased to £500 (80%)£250 £300 to £400 £500

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5

10

15

20

25

30

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Analysis of 24 company launches where £500 maximum limit offered

Percentage of employees saving £250 or above

SAYE limit analysis

Increase in savings• Survey showed companies

believed that the biggest impact would be an increase in take-up and investment

• The proportion of employees saving £250 or more has increased by 7%

• Across all 30 company launches there are now 23,285 employees saving more than £250 month

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

2014

2013

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SAYE limit increase

Case study - BT

About BT• World’s leading providers of

communications services and solutions• Customers in more than 170 countries• For the year ended 31 March 2014,

reported revenue was £18,287m with reported profit before taxation of £2,312m

• Employees in 61 countries, 87,800 full-time equivalents (72,200 of them based in the UK)

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Interviewing Francis O’Mahony, Head of Employee Share Plans and Share Registration

BT case study

What limit was chosen?The limit was increased to £300 for this launch, but may increase next yearWhat discussions took place in the company to get agreement to changing the limits?This was debated in full by the company’s Operating Committee – including impact on accounting cost as well as benefits to employeesWhat feedback did you get from employees?About time the limits changed! Great that there has been an increase, but a pity the company didn’t offer the statutory maximum in one go

Any feedback from payroll on changing the limits in their systems?There were no significant issues for payrollWhat changes did you see with take-up rates, and average savings?Overall take-up increased by 9% to 71%,

average monthly savings are now £190, with 35% of employees saving more than

£250. As well as the increase in savings limits, the success of this year’s maturity has also had an impactWhat would you like to see re limits going forward?It would be good to see savings limits linked to inflationary measures

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SAYE limit increase

23,285 employees

already saving over £250 a

month

Combination of factors impacting SAYE

• Increase in savings limit• Increase in market share values• Maturity gains• Bonus rates• Employment and confidence

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Analysis of SIPs to August 2014

Changing savings limits

SIP Partnership limit increase

Increased limit (52%)Unchanged

(48%)

SIP Partnershiplimits

Survey

Survey showed 88% of companies intended to increase the monthly savings limit to £150

SIP limit change to August

Of the 29 companies changing limits all have increased the limit to £150 per month

Plan limit changes

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Analysis of 29 companies that have increased partnership limits

Percentage of employees saving £125 or above

SIP Partnership limit increase

Increase in savings• The proportion of

employees saving £125 or more has increased by 4% to 32%

• Savings level:

• Less than £125 = 68%• £125 = 12%• £126 to £150 = 20%• 11,237 employees are

now saving more than £125 per month

26% 27% 28% 29% 30% 31% 32% 33%

August June

February

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The Rathbone SIP example

Impact of changeBoth the overall number of participants increased as well as the proportion of employees saving £125 or more February

2014

65% of participants saving £125

Increase in limits to

£150

By July, 6% increase in

participants

11% = £12557% = over

£125Total 68%

Company opinion'The company has always been in favour of SIP and provides both Free and Matching shares. The change was discussed at the executive committee meeting with the increase in savings limit regarded as a positive step.Having introduced the change, it is currently thought that the limits are now set at about the right level.’Richard LoaderCompany Secretary

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SIP limit increase

Case study – United Utilities

About United Utilities• Manage and operate water and

wastewater assets in the North West• 3 million households and 200,000

businesses• 5,500 employees from the top of

Cumbria down to Cheshire covering a whole variety of roles from financial assistants and engineers to technicians sorting out water flow blockages

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Interviewing Bernadette Kilroy, Share Schemes Manager, United Utilities

United Utilities case study

What discussions took place in the company to get agreement to increase the SIP Partnership limit?There is already a policy aim to encourage employees to hold shares and ShareBuy is key. Ever since the limit change was announced last Autumn, there has been support to increase savings levels from the CEO, the board and the Reward teamHow was the change communicated to employees?We used this as an opportunity to rebrand and relaunch ShareBuy. We worked with the Reward team to include the plan within the benefits package ‘MORE for you’. A campaign was run throughout March and April to raise awareness of the plan and encourage employees to take advantage of the limit increase

How did employees react to the change?They were pleased with the change and impressed with our proactive approach with the communication campaignWhat changes did you see with take-up rates and savings levels?By May, overall take-up had increased by 15% with 47% of participants investing

more than £125 in AugustWould you like to see limits going up again in the future?With employees being able to use online services to change their savings limits the process is now straight forward and future increases would be welcomed

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SIP limit increase

11,237 employees

already saving over £125 a

month

Combination of factors impacting SIP

• 14 of the plans have Matching shares• 1 has introduced a cap on the amount of

matching

• Others currently in planning• 7 Trust Deed and Rules needed updating • Scheduling of changes balanced with

other company tasks• Waiting agreement to relaunch

Small ripple or big splash?