Bleep test

Best Buy Table is the Beep Test for Lazy Money

Charities could - and should - be earning up to 2.5% interest on their reserves

The taxman confirmed this week that £560m in Gift Aid payments slip down the back of the sofa every year because not enough tax payers tick the Gift Aid box when they make a donation. In fact its research shows that a third of eligible donations did not add Gift Aid when they could have done. That’s around £1,500 per charity in lost income. Half of this is down to the individuals’ omission and half is down to the charities not providing the opportunity in the first place. A surprising 70,000 charities have registered for Gift Aid but never actually claimed any.

A similar failing on the part of charities is the loss of income suffered because cash reserves are sitting in accounts that bear little or no interest. Research by Back of the Sofa shows that over 40% of small charities are earning a pittance of 0.1% or less on their savings. Just a quarter of them earn over the Bank of England base rate of 0.5%.

That’s just lazy money. Even for easy-access accounts, there are rates of 0.75% available out there for charities, just by filling out an application form. With cash reserves averaging at just over £100,000 per charity, that’s £750 a year being wasted for absolutely no reason. And opting for a fixed rate bond could mean them earning up to 2.5%.

The Charity Commission advises that: “The costs and benefits of the current and deposit accounts held should be regularly reviewed to ensure bank charges and/or rate of interest are competitive”. However, according to the Charity Banking Spotlight, over half of charities have been with the same bank for at least a decade. Three quarters of charities use the top five banks but High Street names have a noticeable absence from the Best Buy Table for Charity Deposit Accounts and none offer any decent long-term returns - with fixed term deposit accounts restricted to 90 days.

Anything a charity earns as interest is tax free income so, if your charity has any cash reserves, then find out how it can earn more money even when it’s securely locked away.

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