Menu Close

Share schemes found to boost wealth by up to £10,000

Staff who take advantage of share schemes could be better off to the tune of £10,000 compared to those who do not, according to new research.

Data from the Social Market Foundation (SMF) revealed there is a distinct ‘wealth benefit’ of participating in share ownership schemes – and yet less than 5% of workers currently do so.

SMF analysis of Bank of England Survey statistics from 2019 found that among households in the bottom income quartile, the median amount saved each month was just £12. Most (47%) were saving nothing from their earnings each month, while nearly a third (31%), had no savings in the bank that they could draw upon in an emergency situation.

But it found the benefit of share ownership was particularly strong for those on lower incomes, where it gives workers a mechanism to accrue far more than those on similar wages.

Among the poorest half of people aged 35 to 44, wealth was £450 for those who were not employee shareholders. But for those who did own shares in an employing company, wealth was £8,835, a difference of £8,385.

Commenting on the data Scott Corfe, research director at the SMF, said: “Companies that offer employee share ownership are giving their workers an opportunity to build up their wealth and financial resilience. That should be encouraged.”

He added: “Too many people on low incomes struggle to build up savings and wealth that can help them weather tough times and enjoy financial security.”

Corfe argued that if politicians want a fairer, more resilient economy after the pandemic, they must take the lead to help create an expansion of employee share ownership by removing any stumbling blocks to its adoption.

Peter Swabey, executive director at ProShare, explained that the report had found many factors which were limiting employees’ participation in share schemes, and recommended a range of interventions to encourage their use.

He said: “These barriers include a lack of awareness of the benefits of ownership, as well as ‘risk aversion’ and the requirement to stay with the same employer for a minimum of five years to realise maximum plan benefits.”

He added: “For employers, the cost of administering share plans and the complex accounting rules for their use can be a deterrent.”

Companies that do offer the chance for employees to buy shares in the organisation include Royal Mail, BT, Tesco, Whitbread, and Greggs.

Some 14,000 firms offer staff this benefit.