While the economic woes pervading society have encouraged belt-tightening all round, one sector – thankfully – is still digging deep into its pockets. The doom and gloom is encouraging the rich to be more generous, according to researchers from Barclays Wealth who have compiled a new study of charitable giving.
Three-quarters of the 500 Britons and Americans surveyed for the Tomorrow’s Philanthropist report have not decreased their contributions to charity – and one in four has even increased levels of donation in the past year and a half.
Depleted investment portfolios, lower property prices and companies’ valuations have not pushed these individuals into scrimping on giving. Indeed, they would rather do away with new luxury cars, hiring staff, eating out and holidays than stop donating to favoured philanthropic causes, Barclays says. Only education fees remain untouchable.
While philanthropists of yore – such as Andrew Carnegie in the US – took a puritanical approach and saw giving as a way to rid themselves of the stains of commercialism, “new philanthropists” regard charity in much the same way as they do conventional investments. They want to take an active interest in the charities they support and look for proven returns.
Barclays calls this breed “the go-givers”. About three-quarters of those questioned who were under 45 believed individuals had to take on more responsibility for the needy as governments’ debts rise .
Emma Turner, head of philanthropy at Barclays Wealth, says: “In some ways, the recession and its knock-on effects have galvanised the approaches taken by wealthy donors, who are in a bullish mood to not only carry on giving, but to make an even bigger impact in the future. Because many of them have an entrepreneurial streak, they take risks, want value for money, solve problems and generally do things differently.”
The wealthy are turning to organisations such as the Institute of Philanthropy and New Philanthropy Capital, two prominent consulting groups, for direction as they attempt to find a portfolio of “charities” they should support. New Philanthropy Capital, which was founded by four former Goldman Sachs partners, employs 15 analysts to assess the performance of various charities and suggest which are suitable for investment.
Engaging with these advisers is expensive, however: hiring an adviser from New Philanthropy Capital can cost up to £800 a day.
There are various ways to donate. But while almost 60 per cent of people in the UK contribute to charity, only one in three is currently taking advantage of the tax benefits of doing so, according to the Charities Aid Foundation (CAF).
Share giving offers a way to pass assets to organisations while also unlocking capital for the individual. When gifted, listed shares, unit trusts and open-ended investment companies (oeics) are eligible for full personal income tax relief and are also exempt from capital gains tax, even if the value of the shares has increased significantly.
So, a gift of £1,000 worth of shares should reduce your income tax bill by £220 if you are a basic rate tax payer and by £500 if you fall into the higher income bracket, starting in April. Payroll giving permits gifts to be made from your salary before it is taxed, so reducing your tax bill.
Another option is the CAF charity account, which is similar to a current account apart from the fact that it is tax-efficient. With a Charity debit card and a “chequebook”, people can make regular donations to the charities of their choice.
For those looking to donate considerable wealth, a charitable trust could be considered. While these are flexible structures, they can cost from £5,000 to £15,000 just to set up. A less expensive alternative is to establish a trust through the CAF. These require a minimum investment of £10,000.
