Charities' investment returns have fallen and "could be substantially improved" to boost income, the National Council for Voluntary Organisations will say today.

"General charities" - the bulk of the sector - earned a return of only 3.4 per cent on investment assets of £60bn in 2005-06, compared with almost 5 per cent in 2000-01. Large private schools with charitable status, which are under political pressure to increase their income to finance bursaries, earned only 3.9 per cent.