ETASSUM34190 - Schedule 3 SAYE option schemes: Linkage to Savings (Arrangement): Partial exercise of options

If an option is being partially exercised “early” (before the full 36 or 60 monthly contributions have been made), it is not possible for further contributions to be made under the related savings arrangement. The terms of the SAYE Prospectus are such that once a repayment of contributions has been taken the savings contract is effectively cancelled. Scheme organisers should ensure that provisions of scheme rules relating to partial exercise are compatible with this.

However, there is nothing to prevent there being more than one partial exercise of an option during the 6 month window period following the bonus date, up to the total of the savings repayments received, providing the scheme rules permit it. It is acceptable for scheme rules to provide for the lapsing of any remaining balance of an option after a partial exercise of that option (see below).

Some employees may only be able to exercise their options partially, even after the relevant bonus date, because they have previously stopped making savings under their savings contracts. If employees stop saving under their savings contracts after, say, 12 months, they may leave their savings in their savings account to accrue interest until the bonus date, whatever the terms of their options (see ETASSUM34130). But whether they can exercise their options then depends on the scheme rules (see below).

If an option-holders stops making monthly savings, leading to the cancellation of their savings contract, the scheme rules may either:

  • permit the option-holder to use repayments of such savings (plus any interest to which he is entitled) to exercise a proportion of his option during any exercise periods provided in the rules, for example in the 6 months following the bonus date if the option-holder remains in the employment, or
  • provide, if companies prefer, that premature cancellation of the savings contract will cause an option to lapse. Such lapsing provisions can be acceptable, although they are not specifically covered in Schedule 3.

If the scheme rules include lapsing provisions they may provide that, in the event of the partial exercise of an option following an “early” exercise trigger before the bonus date, the unexercised balance shall either:

  • lapse immediately, or
  • lapse in accordance with other provisions in the rules, normally 6 months after the bonus date.