For many bp employees, share schemes represent a significant part of total compensation. Yet the complexity of different schemes, vesting periods, and tax implications can make it difficult to understand their true value or make informed decisions.
This guide breaks down bp’s three main share schemes: Share Value Plan (SVP), Share Match, and ShareSave. Understanding how each works could help you make better decisions about participation, timing, and tax planning.
Share Value Plan (SVP)
The Share Value Plan is bp’s main long-term incentive plan for eligible employees, typically at more senior levels. This usually comes in two forms: Individual Share Value Plan (ISVP) and Group Share Value Plan (GSVP), linked to either individual or group performance.
How it works
- Awards: You receive conditional shares based on your role and performance
- Vesting period: Usually three years from the date of grant
- Performance conditions: Awards vest based on bp’s performance against predetermined targets
- No cost: You don’t pay anything for the shares
Tax treatment
At vesting:
- The full market value of vested shares is subject to income tax and National Insurance
- Tax is usually deducted through PAYE when shares vest
After vesting:
- Any subsequent gains are subject to capital gains tax when you sell
- Annual CGT allowance applies (£3,000 for 2024/25)
Key considerations
- Timing of sale: If you hold shares after vesting, you’ll pay capital gains tax based on your pooled acquisition cost at the point of sale
- Concentration risk: SVP awards can create significant exposure to bp shares
- Tax planning: Large vestings can push you into higher tax brackets and impact other things like childcare benefits and your annual allowance
Share Match
Share Match allows you to buy bp shares from your salary and receive free matching shares.
How it works
- Purchase: Buy bp shares monthly through salary deduction
- Matching: bp provides one free share for every share you buy (1:1 match)
- Holding period: You must hold both purchased and free shares for three years to keep the free shares
Tax treatment
Purchased shares:
- Bought from post-tax salary (no tax relief)
- No additional tax when you sell (cost basis is purchase price)
Free matching shares:
- No tax when awarded
- If held for three years, no income tax on the free shares
- Capital gains tax applies to any growth when you sell
Key benefits
- Instant return: 100% immediate return through 1:1 matching
- Tax efficiency: Free shares escape income tax if held for three years
- Flexibility: Can usually adjust monthly contributions
Risks
- Forfeiture: Leave bp within three years and you lose the free shares
- Concentration risk: Creates exposure to bp share price
ShareSave (SAYE)
ShareSave is an all-employee savings scheme that combines regular savings with share options.
How it works
- Savings: Save a fixed amount (£5 to £500) monthly for 3 or 5 years
- Option price: Set at start, usually at a discount to current market price (often 20% discount)
- Choice at maturity: Take your savings plus interest, or use savings to buy shares at the fixed option price
Tax treatment
- Savings: Made from post-tax salary
- Interest: Tax-free bonus on your savings
- Share purchase: No income tax or National Insurance if you exercise options
- Capital gains: Any subsequent growth subject to CGT when you sell
Why it’s attractive
- Reduced risk: Can always take cash instead of shares
- Discount: Fixed option price usually below market price at start
- Tax advantages: Gains on share options escape income tax and National Insurance
Example
Save £500 monthly for 3 years with option price of £4.00 per share:
- Total savings: £18,000 plus bonus
- If bp shares are £6.00 at maturity: Gain £2.00 per share (4,500 shares = £9,000 gain)
- If bp shares are £3.00 at maturity: Take cash savings instead
Common mistakes to avoid
Holding too long
Many employees become emotionally attached to company shares, holding far longer than optimal for diversification.
Better approach:
- Regular, systematic selling often works better than trying to time the market
- Consider selling shares as soon as they vest to avoid concentration risk
Ignoring tax planning
Large share vestings or option exercises can create unexpected tax bills.
Plan ahead:
- Understand when shares vest and plan for tax liability
- Consider timing disposals across tax years
- Use annual CGT allowances efficiently
Not participating
Some employees avoid share schemes thinking they’re too complex or risky.
Reality check:
- ShareSave has limited downside risk
- Share Match provides guaranteed additional shares (1:1) if you can commit for 3 years (value will depend on share price)
- SVP offers valuable long-term incentives which can transform your financial future
The bottom line
The key is balancing the benefits against concentration risk and tax efficiency. Don’t let complexity prevent you from participating, but don’t let participation create an unbalanced portfolio.
Most importantly, view these schemes as part of your broader financial plan, not standalone investments.
Who can you think of that’s confused by their bp share schemes? Share this article with them. It could help them make better decisions about their compensation.
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This is for educational purposes only. It’s not personal advice and we’re not recommending any specific investment strategies. Everyone’s situation is different, so what’s right for one person might not be right for another.
While we have extensive experience helping bp employees and alumni optimise their benefits, Emery Little operates independently and is not affiliated with or endorsed by the bp group, including BP Pension Trustees Limited, on behalf of the BP Pension Fund. This allows us to provide objective, independent guidance focused solely on your best interests.
