Is your charity making the most of its donations?

02nd March 2018

A charity’s reserves should be a valuable source of income

There are more than 167,000 registered charities in England and Wales and collectively they generated more than £75 billion of revenue in the 2016/17 tax year.

The cash reserves held by them averages over £100,000 per charity and totals £16 billion in the UK according to the Charity Income Spotlight report.

With rates as high as 2.50% for charities that don’t need access to their funds for some time, you’d think that cash deposits would be a good source of income for the charity sector.

Alas, this is not the case, according to research published by Third Sector Magazine last month. This showed that 85% of charities earn less than the Bank of England’s base rate of 0.50%, with nearly a third not even earning a measly 0.10%. This means that charities are missing out on millions of pounds each year.  

Not all charities are able to lock-away their reserves and not all savings providers will accept charity funds, but even easy access funds can earn up to 0.75% from alternative providers. On a balance of £100,000, this means the difference between earning £100 or £750 a year.

So why are so few charities taking advantage of the extra income available?

The problem is that it can be time consuming and difficult to find out who is offering the best rates to charities and many savings providers don’t offer accounts for charities.

Of those that do offer charity accounts, the top five banks in the Charity Banking Spotlight are all high street names – representing three quarters of the charities between them – all offering poor rates

More than half of UK charities have been with the same bank for at least a decade. And while it makes sense for charities to have a current account with a mainstream bank to manage their day-to-day banking, this doesn’t mean they have to or should use the same bank to look after their reserves.

Surely then the charity sector itself should offer a safe haven for this valuable hard-earned cash?

Unfortunately, the type of easy access account approved by the Charity Commission (Common Deposit Funds) currently earns an average of 0.35%, with funds deposited falling outside the protection of the Financial Services Compensation Scheme (FSCS).

Since July 2015, all charities, regardless of their size, qualify for protection by the FSCS of up to £85,000 per banking licence – so not only could charities be significantly improving the interest they are earning by switching savings accounts, they could also improve the protection of this money as well. For more information please look at our FSCS Guide.

It’s important for everyone to make their cash work as hard as possible but, arguably, it’s even more essential for a charity to earn as much interest as it can in order to maximise the value of the generous donations it has worked so hard to raise.

We have recently launched a Charity Best Buy Table in partnership with Back of the Sofa - a  new free service dedicated to helping charities maximise their funds.

For more information about Back of the Sofa, which was launched in October 2017 to help charities do more good by boosting their income in innovative ways, without having to ask for more donations, visit their website

So, if you are the trustee, treasurer or finance director of a charity and want to ensure your cash reserves are working as hard as they can, take a look  at our Charity Best Buy Table or call one of our savings experts on 0800 011 9705.


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