The accumulation for up to 12 months of salary deductions to buy SIP partnership shares may save on administration but will engender financial risks for the employing company. SIP rules can make free or matching shares held for less than three years by a ‘bad leaver’ subject to forfeiture. On a rights issue, a SIP participant has the same choices as any other shareholder but must hold any new shares outside the SIP unless he ‘tail swallows’. Reinvesting SIP dividends in dividend shares saves no tax for basic rate taxpayers and creates a tax trap for the upwardly mobile.
