Making complex things simple Impact of SIP and SAYE limit changes Was it really worth all the fuss? Presented by Phil Ainsley and Jennifer Rudman

Introduction 2 Phil Ainsley Director, 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 Rudman Strategic Development Manager, All Employee Share Plans Overall responsibility for defining Equiniti’s all employee share plan strategy and enhancing its employee share plan services

Impact of SIP and SAYE limit changes Presentation 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? 3

Last increase to SAYE limit was in September 1991 SIP 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 Shares The 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 Shares The amount of Matching shares is linked to the amount of Partnership shares (max 2:1) so increased from £3,000 to £3,600 4

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%) 5

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 6

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) 7

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 year What 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 employees What 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 payroll What 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 impact What would you like to see re limits going forward? It would be good to see savings limits linked to inflationary measures 8

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 9

Analysis of SIPs to August 2014 Changing savings limits SIP Partnership limit increase 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 10

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 11

The Rathbone SIP example Impact of change Both the overall number of participants increased as well as the proportion of employees saving £125 or more 12 February % of participants saving £125 Increase in limits to £150 By July, 6% increase in participants 11% = £125 57% = over £125 Total 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 Loader Company Secretary

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 13

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 team How 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 campaign What 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 August Would 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 14

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 15

Small ripple or big splash?