Permanently endowed charities will be given more freedom to manage their investments once a new bill making its way through parliament comes into law, the Charity Commission has said.
The Trusts (Capital and Income) Bill had its final reading before the House of Lords yesterday and will go to the Commons for consideration. The commission expects the bill to receive royal assent in January next year.
The bill proposes that trustees of permanently endowed charities will not have to obtain permission from the Charity Commission before they adopt a "total-return" approach to investment, which allows them to treat increases in the capital value of investment assets in the same way as income from those assets.
At present, permanently endowed charities must spend income from investments and cannot sell assets when their capital value increases. They cannot use a total-return approach unless they obtain an order from the commission allowing them to do so.
A commission spokeswoman said the plans would encourage charities to adopt a total-return approach and would reduce the administrative costs to both the commission and charities.
"A total-return approach can give charities greater flexibility in achieving their investment objectives," she said.
She said charities would still have to obey rules laid down by the commission. It plans to consult on these when the bill becomes law.
"The consultation will be looking at the legal framework the trustees will have to work within, including what checks and safeguards for permanently endowed funds will be appropriate," she said.
The changes are expected to affect almost 14,000 charitable trusts with a permanent endowment registered with the Charity Commission.