The Pros And Cons Of SIPs and SAYE Plans

Posted by Simon Moore on August 27

Share Incentive Plans (SIPs) and Save As You Earn (SAYE) plans both give you ways to buy shares in your employer. That means you can own a small piece of the company you work for. Owning a share means you have a stake in the company and are entitled to a piece of the profits.

Tax Benefits

Also, both plans often come with tax benefits, you can end up paying less tax and potentially avoid National Insurance contributions on the money you invest. Furthermore, SAYE can let you buy shares at a discount too.

Limitations Of Single Share Ownership

However, there is one important drawback with both types of plan. Even though your employer may be great, holding just a single company as an investment can be risky.

Yes, individual companies can do very well and their shares can grow in value. But there is a dark side too, if the company struggles, market conditions change or there is some sort of fraud or large regulatory issue then a company's shares can become worthless. This is not common, but it does happen.


There is an alternative to holding just a single company in your portfolio. It's to diversify by tracking a broad index of funds. This is what Moola offers, for example. A Moola portfolio typically invests in thousands of companies around the world.

While this doesn't guarantee that performance will be superior to any single company, it does mean that performance will typically be smoother. Individual shares can fall to zero, but well-diversified portfolios are highly unlikely too based on history.

So SIP and SAYE plans can be useful ways to save given the tax benefits and potential to buy shares at a discount, but it's important to be aware of the risks of holding too much of your money in a single company. If you let a lot of your wealth build up inside a SIP or SAYE plan, then you may be taking more risk that you realise.

Written by Simon Moore

Simon is responsible for investing and related content at Moola. He was previously CIO of FutureAdvisor, a US digital advisor. His most recent book Digital Wealth, explains automated investing. He studied economics at Oxford, and completed his MBA at the Kellogg School of Management.

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