What happens to SAYE share options when a participant dies before exercising them?

Under paragraph 32 of Schedule 3 to ITEPA 2003, unexercised SAYE share options do not lapse on the participant's death. The scheme must allow the options to remain exercisable, typically by the participant's personal representatives, within defined time limits depending on when death occurs relative to the bonus date.

What is the time limit for exercising SAYE options if the participant dies before the bonus date?

If the participant dies before the bonus date, the personal representatives may exercise the share options at any time from the date of death up to 12 months after the date of death. This provides a full year from the death in which to decide whether to exercise the options under the scheme rules.

What is the deadline for exercising options if the participant dies on or within 6 months after the bonus date?

If the participant dies on or within 6 months after the bonus date, the options may be exercised from the date of death up to 12 months after the bonus date. The deadline is measured from the bonus date, not the date of death, so the available exercise window may be shorter than a full 12 months.

Do paragraph 32 rules apply if the participant dies more than 6 months after the bonus date?

No. If the participant dies more than 6 months after the bonus date, paragraph 32 of Schedule 3 does not apply. The options would instead need to be dealt with under other provisions of the SAYE scheme rules, which may impose different conditions or time limits on exercise by personal representatives.

Income Tax (Earnings and Pensions) Act 2003 Schedule 3 paragraph 32

Exercise of options: death

Paragraph 32 of Schedule 3 sets out the rules that a SAYE (Save As You Earn) option scheme must include to allow share options to be exercised following the death of a participant.

If a participant dies before exercising their share options, the scheme must allow those options still to be exercised after death
Where death occurs before the bonus date, the options must be exercised within 12 months of the date of death
Where death occurs on or within 6 months after the bonus date, the options must be exercised within 12 months of the bonus date
In all cases, the exercise window opens on the date of death and closes at the end of the relevant 12-month period

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