the Provident Financial plc Buy As You Earn Share ... · Welcome to the Provident Financial plc Buy...

Welcome to the Provident

Financial plc Buy As You Earn Share

Incentive Plan (“BAYE Plan”)

The BAYE Plan provides all eligible employees with an opportunity to purchase shares in Provident Financial plc in a potentially tax efficient manner.

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Provident Financial plc Buy As You Earn Share Incentive Plan (“BAYE Plan”)

We are pleased to provide you with an opportunity to join the BAYE Plan. The BAYE Plan allows you to buy shares (known as ‘Partnership Shares’) from your pre-tax salary each month and to reward your commitment, Provident Financial plc ("the Company") will give you one free ‘Matching Share’ for every four shares you buy using the deductions made from your salary.

As the shares you buy have to be held in the BAYE Plan for five years from the date of their original purchase date before they can be withdrawn free of income tax and National Insurance Contributions (“NICs”), the BAYE Plan should be

considered as a medium to long term investment. You’ll also need to consider the risks associated with holding shares as their value will fluctuate from the moment you purchase them.

This booklet provides full details of the BAYE Plan and how to join. It is recommended that you read all of the information, including the accompanying Partnership and Matching Shares Agreement (“the Agreement”) and Financial Services Compensation Scheme ("FSCS") Information Sheet before deciding whether or not you want to participate.

Yorkshire Building Society is the Trustee of the BAYE Plan and YBS Share Plans (which is part of Yorkshire Building Society) will act as administrator. If you have any questions you’d like to ask about the BAYE Plan you can call YBS Share Plans on 0345 1200 300 – they’ll be happy to help. Lines are open 9.00am until 5.00pm Monday to Friday (excluding Public holidays in England and Wales).

Like any investment there are risks associated with holding shares. The market price of Provident Financial plc shares will fluctuate and will likely fluctuate between the date of deduction from your pay and the date that the shares are acquired by YBS Share Plans on your behalf. It is also likely that the share price will have changed between the date that any shares are bought or awarded and the date that they are released from the BAYE Plan. The value of shares can go down as well as up, so you may not get back the full amount you invest.


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What is the BAYE Plan?

The BAYE Plan is an all employee tax-advantaged share plan recognised

by Her Majesty’s Revenue and Customs (“HMRC”). The BAYE Plan

provides all eligible employees with an opportunity to purchase shares in Provident Financial plc in a potentially

tax efficient manner as shares are purchased using pre-tax salary (i.e. before any income tax and

NICs have been deducted).Who can

participate?All UK employees of the

Provident Financial plc group who have been employed for a minimum of six months are

eligible to apply at any time.

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Receive Matching Shares

In addition to the income tax and NICs savings you’ll make on the deductions from your salary, Provident Financial plc will give you an extra share free of charge (known as “Matching Shares”) for every four Partnership Shares you buy.

Withdraw Shares

You’ll need to keep your Partnership and Matching Shares in the BAYE Plan for five years from the date of purchase before you can withdraw them without having to pay any income tax and NICs. If you leave the Provident Financial plc group before that time you’ll have to withdraw your shares from the BAYE Plan at the earliest opportunity and may have to pay some income tax and NICs on any shares that haven’t been held for five years or more; this will depend on your reason for leaving. You may also forfeit any Matching Shares which have not been held for at least three years at the time of leaving.

How does the BAYE Plan work?

Some things to consider...

Buy Partnership Shares

The BAYE Plan gives you the chance to buy Provident Financial plc shares on a monthly basis throughout your employment, using the deductions you choose to make from your pre-tax salary.

Payroll will forward your salary deductions to YBS Share Plans who will buy shares for you on or around the 14th of each month. The shares you buy are called ‘Partnership Shares’. These are Ordinary Shares in Provident Financial plc.

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Some things to consider

The tax advantages offered by the BAYE Plan mean you should consider any purchase of shares under the BAYE Plan as a medium to long term investment.

As you won’t pay income tax or NICs on the salary you contribute to buy shares, this may affect your entitlement to, or the level of, a range of contribution-based and earnings-based benefits. Please refer to ‘What if I claim benefits?’ in the ‘Additional Information’ section for more details.

How does the BAYE Plan work? Continued6


For example:

If your monthly deduction was £150 and the price of Provident Financial plc shares on the day of purchase was £7.00, 21 shares would be bought on your behalf. The purchase cost would be £147.00 (i.e. 21 x £7.00) leaving a surplus of £3.00, which would be added to your next contribution and used to buy shares the following month.

What’s the maximum I can contribute to the BAYE Plan?

If your salary is £18,000 of more per annum, you can contribute any amount (in whole pounds) from £10 to £150 per month (from your pre-tax salary), subject to a maximum contribution of £1,800 in any tax year. If your salary is less than £18,000 per annum, you can invest up to 10% of your salary with a minimum investment of £10 each month. For example: If your gross basic salary is £12,000 per year, then the maximum amount you could contribute to buy Partnership Shares would be £1,200 (£12,000 x 10%) in each tax year.

Shares will be purchased for you on a monthly basis and if there’s any money left following the purchase, this will be added to your next contribution and used to purchase shares the following month.

What price will I pay for Partnership Shares?

The price you pay will be the price of Provident Financial plc shares when the Trustee enters the market to purchase shares each month. It’s therefore likely that every time the Trustee buys shares on your behalf you’ll pay a different price for them and will buy a different number of shares. The number of shares bought on your behalf is determined by dividing the monthly deduction (plus any unused monies carried over from a previous month) by the share price at the time of purchase. The Trustee will buy Partnership Shares on your behalf on or around the 14th of each month (but in any event no more than 30 days from the date on which your BAYE Plan contribution is deducted from your salary).

The current price of Provident Financial plc shares can be found online at www.providentfinancial.com/investors/share-price-information

A bit more about Partnership Shares


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http://www.providentfinancial.com/investors/share-price-information

http://www.providentfinancial.com/investors/share-price-information

Illustration – income tax and NICs savings on monthly purchase of Partnership Shares

The above table is provided for illustration purposes only and based on the rates/bands of income tax and NICs in force at the time of publication (2018/19 tax year). The amount of income tax and NICs that you pay will depend on your own personal circumstances. Scottish rates/bands of income tax may differ. Please note that whilst you will make these income tax and NICs savings at the time deductions are taken from your salary, you’ll have to pay income tax and NICs if you withdraw any shares or leave the Company in certain circumstances within five years of their purchase date.

A bit more about Partnership Shares Continued

Monthly contribution from pre-tax salary

Monthly Tax and NICs savings – basic rate taxpayer (20% income tax, 12% NICs)

Monthly Tax and NICs savings – higher rate taxpayer (40% income tax, 2% NICs)

Monthly Tax and NICs savings – additional rate taxpayer (45% income tax, 2% NICs)

Tax and NICs saving per month

Equivalent cost of deduction from net pay





£10 £3.20 £6.80 £4.20 £5.80 £4.70 £5.30

£50 £16.00 £34.00 £21.00 £29.00 £23.50 £26.50

£100 £32.00 £68.00 £42.00 £58.00 £47.00 £53.00

£150 £48.00 £102.00 £63.00 £87.00 £70.50 £79.50


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How many will I get?

For every four Provident Financial plc shares you buy through the BAYE Plan with your own money, the Company will give you another free share. These ‘Matching Shares’ will be awarded at the same price as the corresponding Partnership Shares are purchased each month. If the total number of Partnership Shares purchased cannot be matched by the ratio of 1:4 any unmatched Partnership Shares will be carried forwarded and added to those purchased the following month for matching purposes.

When can I withdraw them from the BAYE Plan?

You’ll have to hold these shares in the BAYE Plan for at least three years from the date they were awarded before you can withdraw them (the “Holding Period”). If you leave the Provident Financial plc group in certain circumstances or withdraw any Partnership Shares within three years of the date they were purchased, you’ll forfeit the corresponding Matching Shares.

A bit more about Matching Shares


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Illustration - here’s an example of how Partnership and Matching Shares would accumulate if you were saving £150 per month into the BAYE Plan.

A bit more about Matching Shares Continued

Month 1 Month 2 Month 3

Monthly contribution £150.00 £150.00 £150.00

Total money available to purchase shares £150.00 £153.00 £153.50

Example share price £7.00 £6.50 £6.75

Partnership Shares purchased 21 23 22

Cost of Partnership Shares purchased £147.00 £149.50 £148.50

Money carried forward following purchase £3.00 £3.50 £5.00

Partnership Shares available for matching 21 24 22

Matching Shares awarded 5 6 5

Unmatched Partnership Shares carried forward 1 0 2

Total Partnership Shares in Trust 21 44 66

Total Matching Shares in Trust 5 11 16

Total shareholding in Trust 26 55 82

Share prices used in the opposite table are for illustration purposes only and are not a prediction of future share price performance. Share prices can fall as well as rise.


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As a shareholder of the Company you’ll be entitled to receive dividends (if and when they are paid) and have the chance to vote on important issues at General Meetings of Provident Financial plc by instructing the Trustee how to vote on your behalf.

Dividends

If Provident Financial plc declare a dividend, the amount of the dividend payable on shares you hold in the BAYE Plan will be credited to the bank account the Trustee holds on record for you. If the Trustee does not have a record of your bank account details your dividend payments will be forwarded by cheque through the post. To help you track the amount of dividend income received from the BAYE Plan, we’ll send you confirmation of the dividends you receive.

What shareholder rights will I have?

Important note: Currently the first £2,000 of dividends you receive in each tax year (excluding those received by pension funds and shares held in an ISA) is exempt from taxation. This is known as the “Dividend Allowance”. You’ll be liable for tax on any dividend income you receive over the Dividend Allowance and will need to declare this through a self-assessment tax return.

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If you leave the Provident Financial plc group for any of the following reasons:

• injury or disability

• redundancy

• retirement (by agreement with the company by which you are employed)

• transfer of employment to which The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply

• change of Control or other circumstances ending the Associated Company status of the company by which you are employed

• death in service

All your shares must be withdrawn from the BAYE Plan at the earliest opportunity but you won’t have any income tax or NICs to pay regardless of how long the shares have been held.

If you leave the Provident Financial plc group for the following reason:

• resignation, dismissal, or fixed term contract with the company by which you are employed comes to an end

All your shares must be withdrawn from the BAYE Plan at the earliest opportunity but you’ll have to pay income tax and NICs on any shares that haven’t been held for at least five years from their original purchase date at the date of leaving. In addition you’ll forfeit any Matching Shares that you haven’t held for three or more years from the date they were awarded.

Regardless of your reason for leaving, any deductions from pay which haven’t yet been used to buy Partnership Shares will be returned to you but income tax and NICs will be deducted from these monies.

What happens if my circumstances change after I’ve joined?


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What happens if I go on maternity leave?

If you go on maternity leave, your deductions to purchase Partnership Shares can continue provided you have sufficient salary to cover your chosen monthly investment. However, if you wish, you can stop and restart deductions at any time. Provided you leave your shares in the BAYE Plan during your maternity leave there are no tax consequences.

I can’t afford the deductions anymore?

You can cease your monthly deductions at any time. Provided your request is received before the payroll deadline for that month, it will come into effect in the month the request is received; otherwise the change will take place in the following month.

You will also be given a window each year when you can choose to change your monthly savings amount.

What happens if my circumstances change after I’ve joined? Continued

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The table opposite summarises the income tax and NICs treatment of BAYE Plan shares if you withdraw any shares from the BAYE Plan whilst still employed by the Provident Financial plc group or leave through resignation, dismissal or your fixed term contract ending.

Partnership Shares Matching Shares

Income tax and NICs on withdrawal within 3 years of purchase

Payable on market value of the Partnership Shares on the leaving date or share price on the date they are withdrawn if still employed.

None. All Matching Shares would be forfeited in these circumstances.

Income tax and NICs on withdrawal between 3 and 5 years

Payable on the lower of: (i) the amount of salary used to buy the Partnership Shares; and (ii) the market value of the Partnership Shares on the date of leaving or the date they are withdrawn from the BAYE Plan if still employed.

Payable on the lower of: (i) the market value of the Matching Shares on the date they were awarded; and (ii) the market value of the Matching Shares on the date of leaving or the date they are withdrawn from the BAYE Plan if still employed.

Income tax and NICs on withdrawal five or more years after purchase / award

None. None.

Share withdrawals and tax treatment


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The next table summarises the income tax and NICs treatment of BAYE Plan shares if you leave the Company due to injury, ill health or disability, redundancy, retirement, death in service, transfer of employment to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 apply, or a change of Control or other circumstances ending the Associated Company status of the company by which you are employed.

Partnership Shares Matching Shares

Income tax and NICs on withdrawal regardless of how long shares have been held

None (but income tax and NICs may be payable on any salary deductions not yet used to buy Partnership Shares).

None.

Share withdrawals and tax treatment Continued

What about

Capital Gains Tax?

You won’t have to pay Capital Gains Tax (CGT) on any increase in value of your Shares

whilst they remain within the BAYE Plan Trust and if you sell your shares directly from the Trust, whilst still employed, you won’t pay any CGT when you sell them

either. You may however have CGT to pay if you sell your Shares on leaving the Company or if you withdraw them

from the BAYE Plan, hold them for a while and then sell them at a later date.

Each person has an annual CGT allowance (currently £11,700 for the 2018/19 tax year), which means the first £11,700 of capital gains (i.e. profit) you make in any particular tax

year is exempt from CGT. Only the amount of profit exceeding the annual allowance will be liable to

CGT. You can find further information about CGT on the HM Revenue and Customs

website at https://www.gov.uk/capital-gains-tax/overview.


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Additional Information

The following questions and answers cover some of the more commonly

asked questions relating to participation in the BAYE Plan. If you

have any additional questions, please call the YBS Share Plans Helpline on

0345 1 200 300 who’ll be happy to help.

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What happens if the share price goes down after shares have been purchased?

If the shares fall in value then the value of your overall investment in the BAYE Plan will also fall. Any investment in the BAYE Plan is a risk. Even though there could be significant tax advantages (provided you retain your shares in the BAYE Plan for long enough), there is no guarantee that the value you’ll get back from the BAYE Plan will be equal to or greater than what you put in.

How will I know how many Partnership and Matching Shares are purchased and awarded to me?

You’ll receive a summary statement each year from YBS Share Plans confirming the number of each type of share you hold in the BAYE Plan.

You can also register to access a more detailed view of your BAYE Plan account online by visiting www.ybsshareplans.co.uk/provident and clicking on ‘Register’. You’ll need your ten digit BAYE Plan account number to hand and will be asked to provide some security information. Registration should only take a few minutes of your time.

How do I stop/restart or cancel my monthly contributions to the BAYE Plan?

You can only change your contribution amount once a year. YBS Share Plans will advise you when the window to make these changes is open.

You can stop or re-start your monthly contributions at any time by contacting your employing company’s payroll. Provided your request is received before the payroll deadline for that month, it will come into effect in the month the request is received; otherwise the change will take place in the following month.

Additional Information Continued


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When can I withdraw my shares from the BAYE Plan?

If you’re still employed

You can take your Partnership Shares out of the BAYE Plan at any time, but you can’t withdraw any Matching Shares from the BAYE Plan until you’ve held them for three or more years from the original award date. If you withdraw any Partnership Shares within three years of their purchase date, you’ll forfeit the corresponding Matching Shares.

You’ll normally have income tax and NICs to pay on any Partnership Shares and Matching Shares (outside the three year Holding Period) you withdraw from the BAYE Plan within five years of their award date but you won’t have to pay income tax or NICs on any shares you withdraw from the BAYE Plan that have been held for five years or more.

Leaver

If you leave the Provident Financial plc group you’ll have to withdraw all your Partnership and Matching Shares from the BAYE Plan at the earliest opportunity (please see page 12). Depending on your reason for leaving, you may have to pay income tax and NICs for those shares which have been in the BAYE Plan for less than five years. You may also forfeit any Matching Shares that haven’t been held for three or more years from their original award date.

Any money which has not yet been used to buy shares will be returned to you after the deduction of income tax and NICs.


Important information

If you’ve been notified by Provident Financial plc that you’re subject to any share dealing rules, you must comply with the requirements imposed by the Company and, if applicable, seek permission to deal before proceeding with any transaction. All employees are subject to the law regarding market abuse e.g. dealing when in possession of inside information.


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Do I have to withdraw my shares from the BAYE Plan after five years?

No, you can leave your shares in the BAYE Plan for as long as you want whilst you remain employed by the Provident Financial plc group. Any increase in the value of your shares whilst they remain within the BAYE Plan will not be subject to Capital Gains Tax.

How do I withdraw my shares from the BAYE Plan?

Whilst you remain employed by the Provident Financial plc group, you’ll need to complete a ‘BAYE Plan Release Form’, which is available by calling YBS Share Plans on 0345 1200 300. You’ll need to return the completed form to YBS Share Plans by post.

If you leave the employment of the Provident Financial plc group, YBS Share Plans will write to you confirming the choices available and any action you need to take, as soon as they’ve received confirmation of your leaver details from your employing company.

Can I sell my BAYE Plan shares or transfer them into my own name?

If you leave the Company or want to withdraw some shares whilst still employed by the Provident Financial plc group you can ask the Trustees to either sell them on your behalf or have the shares transferred into your own name. Once the shares are transferred into your own name you can hold onto them for as long as you like, sell them using a broker of your choosing or transfer them into a Stocks and Shares ISA within 90 days of withdrawing them from the BAYE Plan.

Will I have to pay any administration costs?

The Provident Financial plc group will pay all costs associated with the monthly purchase and award of Matching Shares, however share dealing commission is payable if you withdraw any shares and ask the Trustees to sell them on your behalf. An administration fee is also payable if you request to withdraw your shares and receive a share certificate. These charges are subject to change and will be confirmed at the time you request to withdraw shares or you can contact the YBS Share Plans Helpline for further details before proceeding with your instructions.



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How do I pay any income tax or NICs that I owe if I withdraw any shares from the BAYE Plan?

If the Trustee sells shares on your behalf, any income tax and NICs will be deducted via PAYE from the proceeds of sale before they are paid to you by your employing company’s payroll. If you’ve left the Company however you’ll receive the net proceeds directly from the Trustees. If you request shares to be transferred into your name, sufficient shares will be sold to meet any income tax and NICs that may be due, unless you have provided the Trustee with sufficient funds (in advance) to pay these amounts.

What if Provident Financial plc is taken over?

Special rules apply in these circumstances. If this happens, you’ll be advised of the choices available to you and any action you need to take by the Trustee.

Can the BAYE Plan be changed or terminated?

Subject to legislation and the BAYE Plan rules, some features of the BAYE Plan can be changed in relation to future purchases and awards. Similarly Provident Financial plc can terminate the BAYE Plan at any time. If either of these events occurs the Trustee will write to you confirming how this will affect you and any action you may need to take.



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What if I claim benefits?

As you won’t be paying income tax or NICs on the salary you contribute to buy Partnership Shares, this may affect your entitlement to, or the level of, a range of contribution-based and earnings-based benefits. It may also have a similar effect on some contribution-based and earnings-based benefits paid to your spouse or civil partner. This effect is particularly significant if your earnings are brought below the lower earnings limit for National Insurance purposes (£116 per week for tax year 2018/2019).

If you think you may be affected, you should read the explanatory booklet IR177. You can view this document on the HMRC website: https://www.gov.uk/government/publications/share-incentive-plans-and-your-entitlement-to-benefits-ir177

You can get a copy of this booklet from any HMRC office or the Department for Work and Pensions. You can also seek advice from the Citizens Advice Bureau. The BAYE Plan may have an effect on Statutory Maternity Pay and Statutory Sick Pay. You should take all the information you have been given into account in deciding whether or not to buy Partnership Shares.


I understand the additional information, how do I join?


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You can join the BAYE Plan at any time, provided you’ve been continuously employed by the Provident Financial plc group for at least six months. Please read this information booklet, together with the Partnership and Matching Shares Agreement and the FSCS Information Sheet before deciding whether or not you would like to join. You’ll be asked to confirm your acceptance of the Partnership and Matching Shares Agreement and acknowledge receipt of the FSCS Information Sheet when making your application.

You’ll need some information from the accompanying letter to complete your application, so please make sure you have this to hand before you get started.

Applications received by the 27th of the month (or nearest working day to the 27th) will have their first deductions from salary made the following month and the first purchase will take place the month after.

Joining the BAYE Plan

You can apply to join 24 hours

a dayOnline:

ybsshareplans.co.uk/ provident

If there’s any further questions you’d like to ask about the BAYE Plan after reading this information booklet you can call the plan administrator YBS Share Plans on 0345 1200 300 – they’ll be happy to help. Lines are open 9.00am until 5.00pm Monday to Friday (excluding public holidays in England and Wales).

All communications with Yorkshire Building Society may be monitored/recorded to improve the quality of their service and for your protection and security. Calls to 03 numbers are charged at the same standard network rate as 01 or 02 landline numbers, even when calling from a mobile.

Any questions?

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This information booklet is a summary of the BAYE Plan and not a definitive guide. Full details are contained in the Rules of the BAYE Plan which can be inspected on application to the

Company Secretary. Whilst every effort has been made to ensure the accuracy of this booklet, if there is any doubt or conflict between its contents and the rules of the BAYE Plan and the applicable legislation, the rules of the BAYE Plan and applicable legislation take precedence.

The guidance on taxation in this booklet is based on current legislation and HMRC practice. Provident Financial plc and YBS Share Plans cannot accept any responsibility for changes to

current legislation or practice. The amount of tax that you might pay will depend on your personal circumstances. If you are unsure whether the BAYE Plan has any tax consequences for

you, you should seek the advice of an Independent Financial Advisor.

Nothing in this booklet or any other document shall be regarded as advice to purchase any shares. Provident Financial plc and YBS Share Plans cannot, and do not, provide any advice as to whether or not you should participate in the BAYE Plan. If you are in any doubt as to the course

of action you should take, you should consult an independent financial adviser.

General Information


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The Financial Services Compensation Scheme (FSCS)Important Information about compensation arrangements

Your eligible deposits with Yorkshire Building Society are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme.

This limit is applied to the total of any deposits you have with the following: Yorkshire Building Society, Chelsea Building Society, Norwich & Peterborough Building Society and Egg. Offset deposits through our subsidiary Accord Mortgages Limited are held by Yorkshire Building Society on behalf of Accord. Any total deposits you hold above the £85,000 limit between these brands are unlikely to be covered. For further information please refer to the enclosed Provident Financial plc Partnership and Matching Shares Agreement.

YBS Share Plans is part of Yorkshire Building Society.YBS Share Plans, Yorkshire House, Yorkshire Drive, Bradford, BD5 8LJ Tel: 0345 1 200 300 • Fax: 01274 357 950 ybsshareplans.co.ukYorkshire Building Society provides share plan trustee and administration services, including deposit taking, in the UK and subject to English law and regulation. We are not responsible for share plan deposits held by local savings carriers outside the UK.

Yorkshire Building Society is a member of the Building Societies Association and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Yorkshire Building Society is entered in the Financial Services Register and its registration number is 106085. Head Office: Yorkshire House, Yorkshire Drive, Bradford, BD5 8LJ.

Yorkshire Building Society is a member of the Financial Ombudsman Service. Further details are available on request from Yorkshire Building Society. YB

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