Investment income falls

The percentage of income that charities receive from investment returns has fallen steeply since the mid-90s, according to new figures from the NCVO.

The latest analysis, published today in the umbrella body's annual Voluntary Sector Almanac, shows that returns from investment accounted for about 20 per cent of charities' income in the 90s but fell to 10 per cent in 2001/02 and to 7.8 per cent in 2004/05. The almanac defines investment returns as dividends, investment payments and rent from investment property.

Chris Harris, finance director of Action for Blind People, said the decrease could be explained by a rise in other income sources.

"If one part of the sector's income, such as service delivery, goes up, then the others will go down by comparison," Harris said. "So the proportion of investment income could have decreased even if the actual returns stayed the same."

Charles Nall, corporate services director of the Children's Society and next chair of the Charity Finance Directors' Group, attributed the decline to market forces. He said: "During the 90s, there was huge capital growth in the stock market, but from 2000 to 2003 capital growth fell. Charities were selling equities and putting money into cash.

"The figure of 7.8 per cent can be seen as an opportunity cost - a lost income opportunity due to the decision to be more cautious."

John Hildebrand, head of charities at investment management firm Investec Asset Management, said the fall in investment returns could be blamed partly on the Government's decision in 1999 to abolish the 25 per cent tax credit on dividend payments.

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