Investment Planning for Charitable Trusts

The legal responsibilities of Trustees (whether they be for a Charitable Trust or for other entities, such as occupational pensions) have increased significantly over recent years. For Trustees to Charities this is evidenced by the Trustee Act 2000 that came into force on 01 February 2001. This legislation was introduced to keep pace with the evolving investment market, following the previous legislation in 1961, referred to as the Trustee Investment Act (1961). The new act, amongst other points, introduced new powers of delegation, new powers for the appointment of agents and introduced appropriate safeguards for the operation of the new powers including a duty to take proper advice in relation to investments and a statutory duty of care. This is detailed further on the Charities Commission page CC14, section E, 61.  Click here for a link to this document.

Compliance

You will note that in the document under 'Trustees Duties' (page 7), one word highlighted is ‘Diversification’  and is defined as ‘having different types of investment, and having different investments within each type’.     The Trustees must also consider the suitability for their charity of an investment.

The value of funds and the income generated can fall as well as rise and is not guaranteed. Past performance is not a guarantee of future performance.

Taxation

As a registered UK charity, the Trustees will be aware of the tax benefits that a Charitable Trust can enjoy. We have provided a link here to the HMRC website which details these advantages.

In addition there are Common Investment Funds (CIFs) available to some Charitable Trusts that have administrative advantages for the tax charges taken from a fund and we can consider these in line with other investment offerings available.  

Our Independent Financial Advice Offering

We are Independent Financial Advisers and Chartered Financial Planners based in Guildford, Surrey.

We have excellent contacts with many investment houses, some of whom have individual departments for Charities' and specialise in this area. We can use these contacts to develop your Charities investment strategy to meet its objective of diversification. This could mean diversification across investment sectors and across different companies to ensure that ‘all your investment eggs are not in one basket’.

Presentation and Investment Recommendations

We are pleased to offer presentations and information to Trustees to ensure that they have sufficient understanding about investment to make prudent decisions, whether that be to generate income or capital growth, or indeed both.

This will need to encompass the Trusts' aims, its attitude to risk, investment strategy and its stance on ethical investment. The number of ethical and ecological funds is expanding and these new offerings may become attractive as time changes. This may be partly controlled by your trusts governing document or its existing permanent endowment situation. You may wish to refer to our example Investment Risk Scale to consider investment risk further. These decisions and considerations will need to be fully documented for the Trust’s records.  

Dependent on the amount invested and the circumstances surrounding a Charitable Trust, we have access to highly competitive allocation rates for Trusts, so potentially keeping investment charges to a minimum.

Review

The initial discussion and implementation of an investment strategy for a Charitable Trust is the beginning of an investment process. Once implemented, the investments should be reviewed on regular basis, and if required re-balanced, to ensure that they are meeting the Trusts' investment objectives both now and into the future. As the objectives of the Trusts funds may change, so may the asset allocation. As a minimum, this should be once a year.

Fees V Commission

As an Independent Financial Adviser we can offer a Charitable Trust the ability to work on a fee or commission basis. To date, we have found that many Charitable Trusts prefer to work on a fee basis to demonstrate transparency, as indicated at the Charities Commission document CC14 ‘Investment of Charitable Funds: Basic Principles’.
    
We look forward to hearing from you and serving your Trust accordingly.  

For guidance and information purposes only. Please seek Independent financial advice before proceeding with any changes/new contracts. The Financial Services Authority does not regulate taxation advice.
Churchouse Financial Planning is authorised and regulated by the Financial Services Authority