The length of time it takes for bonus rates to take effect for sharesave schemes could be reduced if HM Revenue and Customs’ (HMRC) proposals to change the way schemes are administered are approved.
In response to an informal consultation on sharesave administration, which was published in February, HMRC proposed that bonus rates for sharesave schemes should apply as soon as staff are invited to join the scheme, as long as applications are returned 30 days after the new rates come into force.
This would clear up confusion over which rate should be adopted if changes to bonus rates happen during the time employees sign up for a scheme. HMRC has also proposed to alter the mechanism that triggers bonus rate changes, which would correct a disparity between bonus rates and bank rates. The downturn has caused bank base interest rates to fall, so, in some cases, sharesave providers will be paying higher rates than on bank savings accounts.
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Currently, a rate change is triggered for all new three-, five- and seven-year sharesave saving periods on the condition that the 30-day moving average of the three- or five-year sterling swap rates moves more than 1.25% away from current rates. The proposed mechanism would use a 20-day moving average, with a change triggered if the swap rates move by 0.5%.
Ifs ProShare said the recession made it necessary for changes in bonus rates, which could be part of the 22 April Budget, to become effective more quickly.