Treasury minister rejects Labour request to increase savings limits for all-employee share plans
Tom Newcombe, December 03, 2012
David Gauke, Conservative MP and exchequer secretary to the treasury, has rejected a call from Labour MP Jim Fitzpatrick to increase the savings limits for the Save-As-You Earn (SAYE) and Share Incentive Plan (SIP) all-employee share plans.
Last week, in a letter seen by HR magazine, Fitzpatrick called on Gauke to not prevent employees from saving a bit more each month.
In the letter, Fitzpatrick pointed out that savings limits for the SAYE scheme have not been increased since 1991. "If they had been increased in line with inflation the monthly savings limit would stand at almost £500 today," he wrote.
However, in his reply to Fitzpatrick, Gauke said an increase would benefit only a small proportion of savers and so an increase would not be beneficial.
He wrote: "While the Government does keep the current employee share scheme limits under review, any increase in these limits will have a cost to the Exchequer.
"The Government would also wish to carefully consider the potential distributional impact of any such change. An increase to the current SAYE and SIP limits would only be of benefit to those participants in a position to invest more than £250 a month under SAYE or more than £1,500 a year under SIP, rather than to the broader range of participants in these schemes."
Gauke continued: "You mentioned the Office of Tax Simplification's (OTS) report on tax advantages share schemes, published in March this year. As you may know, the Government has consulted on a wide range of OTS's recommendations to make the schemes more simple to operate and more attractive for employers and employees. The outcome of this consultation will be announced shortly."
Commenting on the treasury minister's latest correspondence, Phil Hall, special adviser to ifs ProShare, a not-for-profit membership organisation that provides a voice for the employee share ownership (ESO) industry, said: "MPs and peers from all political parties have been calling for this long overdue change, but the Treasury is refusing to listen.
"On the one hand this latest piece of correspondence says an increase in the savings limits cannot occur because it will make share plans more attractive – which will in turn have a cost implication – yet in the very same letter the minister states they have been consulting on the Office for Tax Simplification's recommendations, because they want to make share schemes more attractive for employees."
He added: "Put simply, the Government cannot continue to have it both ways."