Charities’ legacy income could fall by up to 15% this year, according to estimates by a legacy consortium.
Legacy Foresight has revised its five-year projection for legacies. It said that the decrease in legacy income caused by the pandemic could be between 1% and 15%, less than initially expected.
Its June projection estimated a drop between 4% and 23%, while the April one was even more pessimistic with a projected loss between 8% and 27%.
The tracker takes into account a range of aspects that could influence legacies’ performance, including the overall economic outlook, demographic factors such as an increase in the number of deaths, and administrative factors.
The estimate was revised up because the administrative delays caused by the Covid-19 lockdown have been less severe than expected, thanks to legacy administration teams’ ability to adapt.
However, Legacy Foresight also said that between April and June its consortium of 82 charities received 9,000 notifications less compared to pre-pandemic forecasts.
The economic crisis is also likely to impact house prices, which could result in a drop in the average value of residual bequests between 3% and 5%.
Finally, while the central estimate sees legacy income decreasing by 8% this year, Legacy Foresight said that a high degree of uncertainty remains, and that “the pessimistic scenario is also a highly plausible outcome” considering that the pandemic could have a second wave.
Legacy income is still expected to grow in the long term, from £3.4bn in 2019 to £3.5bn-£3.9bn in 2024. UK charities could receive between 5,000 and 11,000 more bequests over the next five years because of the additional deaths caused by Covid-19.
‘Cash income remained resilient’
Jon Franklin, economist at Legacy Foresight, said: “Our scenarios suggest that legacy income could fall by between 1% and 15% this year, reflecting the worsening economic environment and potential delays in the sale of property assets caused by a slow-moving market.
“Analysis from the Legacy Monitor showed cash income remained resilient, thanks to legacy administration teams’ speed to adapt during lockdown; this is reflected in our more optimistic outlook for legacy income over the rest of the year.
“As delays unwind and income starts to flow from the anticipated increase in bequests, it is likely that income could rise quite rapidly in 2021 and 2022.”