BAYE or SAYE

Zoon1

My employer offers a BAYE and SAYE savings scheme and I can’t work out which is better for me.

Buy As You Earn - buy shares before tax and NI contributions. If you hold onto your shares for at least 5 years you won’t need to pay Income Tax or National Insurance on the money you get back. May lose money if share price drops. May also be paid dividends on the shares as part of the company profits. Can save up to £138/pay period

Save as you earn - Save directly from pay for three or five years. Save up to £500 per pay period. Buy shares at a discounted option price (10% - 20% discount typically) and potentially make a profit, or simply get your savings back with no risk.

My previous company did a SAYE scheme and I paid for my house deposit with it in a particularly lucrative year, but I am a higher rate tax payer so I am thinking the BAYE option may be better for me?

DRS1

Do both.

The BAYE scheme is a confusing name - it is more commonly called a Share Incentive Plan.  They also seem to have left out some elements of a normal SIP (free shares and matching shares for example) so it could be better.

With the SAYE Scheme you can't really lose especially if the option price is at a discount to the current share price.
Don't pass it up just because the contributions are made out of post tax salary.

Brie

Is the SAYE before tax and NI as well?  Is there any reason you can't do both?  

DRS1

Brie said:

Is the SAYE before tax and NI as well?  Is there any reason you can't do both?  

The SAYE contributions come out of net pay.