ARTICLE · 25 NOVEMBER 2013

Making Ends Meet - Proposed Changes For Permanently Endowed Charities

Smith & Williamson

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It has always been a hotly debated issue – how can trustees meet increasing demands for income from its capital base?

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It has always been a hotly debated issue – how can trustees meet increasing demands for income from its capital base? At a time when interest rates are at historic lows, this can be a pressing issue. If the capital base has grown at the same time, it is tempting to adopt a total return approach, and use capital to help match funding requirements. This may not pose a problem for non-permanent capital, but for trustees of permanent capital, this tends to be a 'no go' area.

The Charities Act 2011 has been amended by section 4 of the Trusts (Capital and Income) Act 2013, and the Charity Commission is reviewing the process of allowing permanently endowed charities to adopt a total return approach to managing their investments.

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