Most charities earn less interest on money than the base rate

A survey of 194 charities carried out for Third Sector finds that a third are earning less than 0.1 per cent on their bank deposits

Banks: persistent low interest rates
Banks: persistent low interest rates

About 85 per cent of charities are earning less interest on their money than the Bank of England base rate of 0.5 per cent, according to research carried out by Third Sector.

The online survey of 194 charities found that 80 per cent of them were dissatisfied with the level of interest they were receiving from their banks, with nearly a third earning less than 0.1 per cent interest.

As well as getting little return on their money, the survey found, many charities felt they were taking too much risk by keeping all their money with the same banks: 42 per cent said they were dissatisfied with the level of diversification their charity had achieved.

Just over a third of charities (35 per cent) kept money that was not needed day-to-day in two separate accounts, 24 per cent had just one account and 15 per cent kept all their money in the charity’s current account. Twenty-seven per cent said they kept their money in three or more accounts.

When asked what prevented them from opening accounts with a wider range of banks, 58 per cent said they were deterred by the amount of time and paperwork involved in setting up new accounts, and 42 per cent said they were worried about the risk of placing their money in newer, non-high-street banks, many of which offer higher interest rates.

The survey was carried out in partnership with the online cash deposit platform Flagstone.

Simon Merchant, co-managing partner at Flagstone, said: "We knew that the persistent low interest rate environment, combined with the complexity of bank account opening processes, had created inertia and an over-concentration of deposits with a small number of banks. This research reveals the scale of that problem for charities."

He said tools such as Flagstone could support charities to open and manage multiple accounts.

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