The Treasury has announced that it is to raise the bonus rates payable on Save As You Earn (SAYE) schemes.

The increase, which comes into force this week, will affect over 500,000 UK employees.

In an SAYE scheme, employees have the option to save over a fixed number of years for the purpose of purchasing shares in their company. Alternatively, they can withdraw their savings and a bonus at the end of the period. These bonuses will increase for three-year plans from 2.84% to 4.23%; for five-year plans from 3.22% to 4.36%; and for seven-year plans from 3.36% to 4.28%.

Staff who choose to leave the scheme after one year will receive a bonus rate increase from 2% to 3%.

Julie Richardson, head of employee share ownership at ifs ProShare, said: "This is good news for the hundreds of thousands of employees who sign up to an SAYE scheme each year and should encourage greater take-up of what is already an efficient tax savings mechanism."

These rates will be effective for SAYE joiners after 1 September 2008.