Charity Commission consults on regulations to allow 'total return' investment

The move would give trustees of permanently endowed trusts greater freedom to act in their organisations' interests, says Jane Hobson, the regulator's head of policy

Jane Hobson
Jane Hobson

The Charity Commission has launched a consultation on draft regulations for permanently endowed trusts that want to adopt a total return approach to investment.

A total return approach means that all investment returns received by a permanently endowed trust are treated as a whole and not labelled as either capital or income, as they would usually be.

Amendments made to the Charities Act 2011 by the Trust (Capital and Income) Act 2013 mean that permanently endowed trusts will be able to adopt such an approach without seeking prior permission from the commission. Before now, charities had to seek permission from the commission to do this; once the new regulations are in place it will be enough to abide by them.

The draft regulations explain how permanently endowed trusts can use the new powers and help trustees ensure they have the proper safeguards in place. They explain that investors can manage their investments to make the most of the return they generate, regardless of whether it comes from dividends, interest or capital gains.

Jane Hobson, head of policy at the Charity Commission, said the proposed regulations would give trustees of permanently endowed trusts the freedom to act in the best interests of their organisations: "The commission promotes the effective use of charitable resources by encouraging charities to be self-reliant – letting charities make decisions that they are best able to make."

The commission is asking for views on the draft regulations by 20 June and expects the new regulations to be in place by October 2013.

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