Sharesave set to return to Ireland with new savings carrier

It will soon again be possible to operate tax-advantaged Sharesave in Ireland once again. A new licensed savings carrier is expected to step into the market in the next few weeks meaning employers with a presence in Ireland will be able to offer staff the benefits of this attractive scheme. We’ll speak to a share plans specialist about this helpful development.

A reminder. Save As You Earn (SAYE) Schemes offer employees a risk-free savings plan with the option to purchases company shares in a tax efficient manner. It is available for private and public companies including non-Irish parent companies that want to create a scheme for their Irish subsidiaries. For the employer it’s attractive because it can be a very effective way to encourage employee engagement and improve retention. In Ireland, however, following Brexit the number of licensed savings carriers in the Irish market fell and the last licensed savings carrier, Ulster Bank, left the market in 2021. Since then, it has not been possible to establish or grant new options under a SAYE Scheme. That is about to change. We understand AIB are set to be the savings carrier, working alongside Computershare as the administrator.

Sharesave operates by the employer granting an option to all participating employees to acquire shares in the company. These options can be granted at a discount of up to 25% of the value of the shares at the time of the grant. When the option is granted, employees enter into a contract with an approved savings carrier and must save an amount between €12 and €500 per month, for a predetermined period of 3, 5 or 7  years. At the end of the term, the employee uses those savings to purchase all or some of the shares granted by the option. If the employee decides not to purchase shares, all savings made during the term will be returned to the employee tax-free. So, a very attractive benefit all round and it is good news that once again it is going to be available in Ireland with an announcement expected soon confirming that AIB will be the licensed savings carrier working alongside Computershare as the administrator. 

So, let’s hear more about this. Lynette Jacobs is a share plans specialist and earlier she joined me by video-link from Manchester to discuss it. I put it to Lynette that it’s a good news story:

Lynette Jacobs: “Yes, correct Joe. It’s very exciting because since 2021 it hasn't been possible to offer tax-advantaged Sharesave in Ireland. In 2021 Ulster Bank which was the last remaining savings provider for Ireland pulled out of the market. Prior to that there had also been Yorkshire Building Society and Barclays which had also operated savings contracts as a savings provider in Ireland but they could no longer do that because of Brexit and they lost their licences to operate it and now, yes, AIB in conjunction with Computershare are ready to join the market and Irish Sharesave can be introduced again.”

Joe Glavina: “Do we know anything more on the timing, Lynette?”

Lynette Jacobs: “So my understanding is that things are more or less ready to go. It's now with the Irish Revenue who should come back around the second week of June to give its final approval and sign off and, as far as I understand, Computershare together with AIB are ready to go then at that point.”

Joe Glavina: “Obviously this is helpful for Irish companies, but also for non-Irish parent companies with a presence in Ireland.” 

Lynette Jacobs: “Yes, absolutely. So for you, your role in HR, is if your company operates Sharesave in the UK and you have employees in Ireland or, perhaps, if you're an Irish-based parent company, and you have Sharesave then it's likely that you will have either stopped offering Sharesave in Ireland over the last few years because it was no longer possible to offer it as a tax-advantaged arrangement, or you've continued to offer it but without the tax advantages, so that there's income tax and PRSI and USC, the social security contributions payable on the exercise. Once this comes back in, it's a great opportunity to relaunch the tax-advantaged Sharesave in Ireland.”

Joe Glavina: “Of course, for the employer this is attractive because they’re a great way to help retain your staff and improve employee engagement and for the employee they’re completely risk-free.”

Lynette Jacobs: “Correct? Absolutely and they are an all-employee scheme so that's why they are liked very much both by employees and by shareholders alike. They're great for employees because they're no risk. The employee chooses to participate, they apply for an option, they make their savings and under Irish plans it can be three, five or seven years - in the UK, it's only now three or five years - and at the end of the option period, when they've done their savings, i the share price is then higher than the option price, they can take their savings plus any interest that they've received on those savings from the savings operator and use that to buy the shares, therefore making an immediate profit. If, unfortunately, the share price has fallen below the option price, they simply get their savings back plus any interest. So yes, they're great.”

Joe Glavina: “So, thinking about HR’s role, I guess it’s a communications piece to raise awareness that this benefit will soon be available again?” 

Lynette Jacobs: “Yes, I mean, I think to start with it's probably something internal to deal with. So, first of all, check that whoever is relevant within the company wants to restart, or start for the first time, offering Irish tax-advantaged Sharesave. If you're a listed company, if you don't already have a Sharesave you may be required to seek shareholder approval to use it. If you've already got one, you need to dust it off, get it ready. You'll need to check who your savings provider is. As I said, at the moment is Computershare working with AIB so they are the only savings provider. There might be other administrators that will be offering it in the first instance. Computershare may already computer may already be your administrator, that's all good. If not, you can consider moving to them or it's likely that many of the other administrators together with other Irish banks, savings institutions, will enter the market in the not too distant future. But yes it’s definitely worth starting to look at it and, obviously, if the decision is made to go on it, then at that point it is definitely worth communicating with your employees that this is something you're going to be offering and explaining it.”

Joe Glavina: “Finally, Lynette, anything else to add?”

Lynette Jacobs: “One thing just to remember, as you referred to before Joe, there are a few differences between how Irish Sharesave works as contrasted with UK Sharesave. So, just so you and your colleagues at the company are aware of what those are. Firstly, whilst like in the UK, there's no income tax payable when the options are exercisable, that’s the case in Ireland but in Ireland, unlike in the UK where there's also no national insurance contributions on the gain that the individual makes, in Ireland there is both USC and PRSI, so social security contributions. Also there are a few key differences in the criteria for Irish Sharesave relative to UK Sharesave. One of those is that in UK Sharesave the maximum discount for the option price is 20% of the share price at the invitation date, normally, and in Ireland it's 25%. That doesn't actually make a difference in practice because if you're a UK company and you're offering it in Ireland you can limit your discount anyway to 20%. Secondly, whilst it's an all-employee scheme and companies generally invite everybody, or everybody who's been there for, say, 6 months or 12 months, perhaps, prior to the invitation date, under the legislation in the UK you can have a maximum qualifying period of up to five years, whereas in Ireland, it's three years. Again, as I said, given that most companies either apply no qualifying period, or a much shorter qualifying period, it doesn't make any difference. A few other areas - I'll just mention a couple of because they get more technical - in the UK since COVID it's been possible for a participant to miss up to 12 months of monthly savings and their option won't lapse. In Ireland that remains at 6 months which it was in the UK before COVID. There's also a slight difference in the UK in that for a number of years now there has no longer been what's referred to as the formal approval process with the UK Revenue whereas in Ireland if you are putting a plan in place for the first time you have to get formal approval of the Irish Revenue before you start offering that plan to your employees. Those are the principal differences. There are a few others too.”

So far, there has been no formal announcement about AIB becoming the licensed savings carrier. That’s because the Revenue approval process is yet to be concluded, but we understand from good sources that it’s just a matter of time and will be this summer. As soon as we know more we will let you know.