Regulations published for total-return policies at permanently endowed charities

Jane Hobson of the Charity Commission says the rules and accompanying guidance will help to make charities more self-reliant

Jane Hobson
Jane Hobson

The Charity Commission has published new regulations and guidance for permanently endowed charities that want to adopt a ‘total-return’ investment policy.

Permanently endowed charities have previously had to seek permission from the commission to adopt a total-return approach, which allows them to treat increases in the capital value of their assets in the same way as income from those assets.

But new legislation, which comes into effect on 1 January, will allow trustees to adopt this approach without permission.

A total-return approach makes it easier for charities to smooth out their spending in good and bad years, and can allow trustees to invest more money in volatile but high-yield assets.

The commission said that it consulted on draft regulations earlier in the year and was told that they were generally effective but there was some concern over their complexity. The regulator said that in light of this it had published the regulations alongside guidance to clarify the rules for trustees.

"The new regulations and the guidance that we have published today are another step to enable charities to be self-reliant," said Jane Hobson, head of policy at the commission.

"We understand that this legislation is eagerly anticipated by some permanently endowed charities and, since it does not come into effect until 1 January, we hope that we have allowed trustees time to look into the changes and be thinking about whether this power is one that will help their charity be more effective.

"We are pleased, as were all the respondents to the consultation, that this new level of flexibility for charities will be available."

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