Encouraging giving from the mass affluent


Tom Rennell


The Philanthropy ProgrammeThe latest offering from The Philanthropy Programme, a series of events for those who advise on philanthropic giving organized by Philanthropy Impact and the Society of Trust and Estate Practitioners (STEP), was held in London on 1 May. This event examined how to encourage greater giving from the ‘mass affluent’ sector, reflecting on both the UK tax incentives available and what the philanthropic goals are for donors at this level.

Opening the session, Gregory Wheatley of Buzzacott’s Chartered Accountants noted that philanthropy is often seen as the preserve of the fabulously wealthy. At the other end of the giving spectrum a large number of relatively small donations are made to charities and sponsored activities.

Between these exists a relatively untapped resource of wealthy individuals who give proportionally less than their better and worse off counterparts. Of the £75 million raised by Comic Relief in 2013, only 100,000 donations were of £50 or above. How can we encourage greater charitable giving from those in this middle ground – the mass affluent?

One way to do this is through tax incentives – though there seems to be a consensus that advisers do not do enough to make donors aware of them. In the UK successive governments have introduced tax reliefs to encourage giving. Perhaps the best known is Gift Aid, which allows charities to regain the basic rate of income tax the donor has paid on the gift.

However, as Owen Clutton of Macfarlanes points out, what many people do not realize is that donors who are higher or additional rate taxpayers, as the mass affluent set undoubtedly are, are also entitled to claim a refund of the difference between the basic rate and the rate they pay. This means that both the charity and the donor benefit from the Gift Aid donation. Organizations receiving donations should also be aware that with donations of over £2,500 charities can actually give up to 5 per cent of the Gift Aid to reward (and therefore encourage) their most valued donors.

Many donors, and indeed their advisers, may be similarly unaware that the value of charitable gifts of shares or land can be deducted from a donor’s income, thereby lowering their rate of income tax. Moreover, as Clutton was keen to impress, gifts of shares are not subject to capital gains tax, so giving in this way represents something of a double tax relief for the donor.

Likewise, while many will know that charitable donations in an individual’s will are exempt from inheritance tax, it is less well known that if they exceed 10% of the estate the inheritance tax on the remainder is reduced by 4%. More importantly, beneficiaries are entitled to ‘rewrite’ a will to include a higher level of donation and thus push the overall donation beyond the 10% threshold. In an estate worth £1 million this means a donor can make a £67,500 donation at the cost of just £16,200, with Her Majesty’s Revenue and Customs (HMRC) footing the rest of the bill. Despite this, while 75% of people in the UK donate throughout their life, only 7% leave donations in their will.

But tax reliefs are not the only way of encouraging more giving by the mass affluent. Describing himself as ‘the very definition of the mass affluent’, Simon Dodds of Deutsche Bank revealed his reasons for donating to the London Community Foundation. He noted that, in contrast to donating to larger charities where in some respects his donation feels ‘lost’, giving through the LCF is an immensely personal experience. Although wealthy, the mass affluent are not wealthy enough to set up and administer their own foundations or trusts. But it is still important to Dodds to retain a degree of control over how his donation is spent as well as to see first hand the impact being made.

The LCF provides a solution. It works as a neutral party that can introduce mass affluent donors to causes and projects they would otherwise have difficulty in accessing.  It provides a platform through which donors can give with a similar level of involvement as with a personal foundation but in a way more suitable for their financial and time commitments. As Dodds put it, ‘The amount of time I want to spend on it works for me.’

LCF’s Lucinda Shaw elaborated: ‘People don’t necessarily know how to give though they want to.’ LCF provides both knowledge of the charities the mass affluent want to give to and the expertise to manage the process. Moreover, it allows donors to ‘retain their brand’ and attach their name to a project.

Much of the session focused on key differences between UK and US attitudes towards philanthropy. Members of the audience pointed out that in the US the culture around philanthropic giving is much more embedded in a holistic approach to financial planning. In the UK there tends to be a ‘reverse snobbery’ towards giving: being philanthropic isn’t something that is talked about. In some respects this culture extends to financial advisers, who often would not raise the subject of philanthropy with a client, instead waiting for the client to do so themselves. For Dodds, who has lived on both sides of the Atlantic, the lack of advice on offer in the UK is striking.

Nonetheless it was generally agreed that this culture is changing. Clutton noted that he and other advisers are beginning to see more mass affluent clients asking about philanthropy and more receptive to a broader conversation about how to give and where.

Tom Rennell is marketing and events officer at Alliance magazine.

Further events in London and around the globe can be found on Alliance‘s conference calendar.


Tagged in: Philanthropy Impact STEP Tax incentives The Philanthropy Programme

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