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Extra £74bn for charities mooted through two reforms

Fundraising | Celina Ribeiro | 11 Jan 2010

Charities could generate up to an extra £74bn from major donors via two North America-inspired reforms proposed in a new report.

The introduction of ‘remainder trusts’ – or lifetime legacies – and personal charitable trusts for wealthy individuals could encourage much higher levels of giving from Britain’s well-to-do, according to a report released today by Professor Paul Palmer from the Centre for Policy Studies at Cass Business School today.

There is a distinctly North American air to the proposals put forward by Prof Palmer (pictured), both of which will enable donors to earn interest on money allocated for charitable donations and retain control over the distribution of the allocated money. Prof Palmer estimates that there is £740bn in net wealth held by 840,000 individuals in the UK; these proposed measures, he suggests, could release 10 per cent of that wealth into charitable pockets.

“These proposals are intended to re-energise the charity sector with endowed charities, which have independent income,” Palmer wrote in the report. He adds that recent growth in the charitable sector has nothing to do with initiatives to increase philanthropy, but rather a steady injection of funds by government.

While the report does not refer to ‘lifetime legacies’ by name, the remainder trusts proposed – which would involve individuals setting aside a minimum of £50,000 for charity during their life, from which they could take money for themselves if necessary – closely follows the lifetime legacy model, which has failed to gain traction in the UK despite success in the US and Canada. The Charities Aid Foundation, in particular, has been exploring the introduction of lifetime legacies in the UK since 2008.

The remainder trusts are targeted at high net worth individuals still working and contributing to their pension funds, who would like to make a major donation to charity, but who are uncertain that they will be able to pay out on all committed funds in the future.

The personal charitable trusts put forward by the report would involve light-touch regulation from within the Charity Commission, and also cites inspiration from Canadian and American models. Critically, Palmer says that the trusts would allow donors the privilege of anonymity and would also require them to spend a certain percentage, up to 5 per cent, of their endowment every year. Many trusts currently spend less than 3 per cent of their endowment annually.

The full report can be viewed here.

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Directory: Cass Business School | Charity Commission
Who's Who: Paul Palmer