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  1. Wealth
September 14, 2017

Why Britain’s philanthropy is still thriving

By Spear's

Contrary to a report that noticed a drop in charitable giving in developed countries, UK philanthropy is still alive and kicking, with more creative solutions than before, writes Sophie Wettern

After a week of tumultuous weather across the globe, a recent report by the Charities Aid Foundation appears, at first glance, to add to the general gloom. The 2017 edition of the World Giving Index found that the share of the world’s population aged 15 or older who have helped a stranger or given time or money to charity fell overall in 2016.  This drop was most marked in developed nations, such at the US and the UK.  In contrast, Myanmar remained the world’s most generous country for the fourth year in a row.

However, a closer look at the figures reveals that, on the whole, we are still more charitable than not. For example, in the US, although overall giving fell slightly, over half of respondents had donated money in the past year while almost three quarters had helped a stranger. Indeed, you have only to look at the response to the Grenfell Tower disaster in the UK (where an estimated £18 to £20 million was raised for those affected by the fire) or to Hurricane Harvey in Houston to see that giving remains a key part of society. Nevertheless, when considering longer-term charitable goals, why are people still donating – and what is the best way to do so?

For many wealthy individuals, philanthropy stems from a desire to ‘give back’ to those less fortunate. For others, donating (or, alternatively, setting up your own foundation) may offer the chance to focus on an issue that you feel is neglected by government, for example developing public awareness of a particular school of artists. Some have a more prosaic reason for giving, that they wish their children to stand independently of their wealth, whilst others may be incentivised to donate by the tax advantages of doing so.

Whatever your reason for charitable giving, flexibility now plays a key role in donations by wealthy individuals. Although traditionally philanthropists have donated directly to a specific charity or set up a foundation to achieve their aim, the last few years have seen a significant rise in donor advised funds. These are accounts held by non-profit entities which allow you to deposit money into the donor advised fund, where it can be held (and invested) until you suggest a charitable beneficiary. The entity will then make a donation to that beneficiary in accordance with your wishes.

The major advantage of such funds (besides tax advantages) is that they offer flexibility – an individual may donate (and receive the corresponding tax benefit) now and then decide later where such funds should be ultimately directed. Where the initial outlay involved in setting up a private foundation or the ongoing administration costs may not be appropriate, a donor advised fund may be seen as an attractive alternative, depending on the circumstances.

However, the charitable sphere is not static. In the UK, charities themselves are being granted wider investment powers. Since July 2016, charities have possessed a ‘social investment’ power, enabling them to invest with a view to both directly furthering the charity’s purposes and to achieving a financial return for the charity. This will enable charities to pursue their objectives in ways that were previously unavailable and allows for limited funds to be put to use in a more efficient way. For example, a homelessness charity could purchase empty properties to renovate and let-out at a low rent to homeless people (benefiting from an overall increase in the value of the properties). Arguably, this power could assist charities in becoming self-supporting in the longer-term (rather than relying on donations). As such, it could be seen by philanthropists as a reason to return to direct donations to charities.

The key message? In an unstable world, philanthropy remains as important, and as attractive, as ever.

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Sophie Wettern works at boutique private wealth law firm Maurice Turnor Gardner LLP

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