I administer the scheme for my workplace so I know quite a bit about this.
Firstly, I think you have slightly misunderstood the scheme - the final cost at the end of the year is 12.5% or 25% of the original cost, rather than a 12.5% or 25% discount off the original cost.
This means that if you are a higher rate tax payer then yes it is worth it - if you buy a bike costing £1000 you effectively save 40% of the cost of the bike initially, then pay 25% of the cost of the bike at the end of the scheme, so you have saved 15% of the cost of the bike (£150 in this example). If you are not a higher rate taxpayer I agree the advantages are more marginal, but you are still spreading the cost of the original purchase which is attractive for some people.
Secondly, depending on who your scheme provider is there may be other options at the end of the one-year hire period. Our scheme provider is Cyclescheme and here is the blurb we give to our employees about the end of the scheme:
During the first year of the scheme, the bike is technically owned by
[employer], who hire it out to you. At the end of the initial year’s
hire period the ownership of the bike then automatically transfers
from [employer] to Cyclescheme, and Cyclescheme will contact you when
the year is up to explain the options.
The default and most attractive option is:
- You pay Cyclescheme a refundable deposit of 3% or 7% of the original purchase price (3% if original price was below £500, or 7% if
original price was above £500). This entitles you to keep using the
bike for a further 3 years with no further payments. At the end of
this extended use period you can either return the bike to
Cyclescheme, who will return your deposit, or you can keep the bike
and no further payment is due.
For completeness, the other options:
You return the bike to Cyclescheme, no more money is payable
You buy the bike from Cyclescheme for a Fair Market Value payment of 18% or 25% of the original purchase price (18% if original price
was below £500, or 25% if original price was above £500) so that you
own it outright from then on.
Please note that under the HMRC rules for the scheme, neither
[employer] nor Cyclescheme are allowed to guarantee the options that
are available to you at the end of the hire period. However the
options presented above are the currently available options and there
is no particular expectation of these changing.
More details about the end of scheme process are available at:
If your employer is running their own scheme or using a provider other than Cyclescheme, the end-of-scheme details may be different of course, but the details you have given are equivalent to our "option 3" which is less attractive than the "option 1" that we use as default; you could ask whether these other options are available to you with your scheme.