26 November 2018
Guest Blog by Meg Abdy, Legacy Foresight
Gifts in wills are a vital and much-valued source of income for British charities – in total, legacies account for 6% of all the income received across the sector. Last year, legacy income totalled £3bn – that’s the equivalent of 36 Comic Reliefs or 48 London Marathons.
Some of our best-known charities are especially reliant on gifts in wills, which can account for a third or even a half of their total income. The money they receive pays for important work, whether it’s ground-breaking medical research, saving lives at sea, preserving national treasures or building wells in developing countries.
The value of legacy giving has been rising over many years; in large part thanks to the growing generosity of the British public. Over the past five years, 580,000 charitable bequests were left in British estates, up from 500,000 (again over five years) a decade earlier.
Legacy incomes also reflect the value of the assets left in those estates – most importantly houses and savings. As our economy strengthens, incomes rise; when it falters, they fall back. Take 2008, when the global financial crisis struck. Almost overnight, UK-wide legacy income fell by 5% – and it took the next three years for that income to revert to its previous level. Conversely, from 2012 to 2017 we saw legacy incomes bounce back, along with consumer confidence and business activity.
So, it’s no surprise that the deep uncertainties surrounding Brexit are having a negative impact on charity legacy incomes. We Brits are deferring important investment decisions – whether it’s to move home, move job, launch a new business or build a new factory – until and unless the position becomes clearer. We just don’t know what’s best.
For now, incomes are continuing to rise, but at a slower rate. Assuming some sort of Brexit deal can be agreed in the coming months, we predict that legacy incomes will grow by 2.4% a year over the next five years, totalling £15.8bn. That’s modest growth compared to the post-recession period from 2012 to 2017, but, far better than the doldrums experienced after the last financial crisis.
However, if Britain were to ‘crash out’ of the EU without a deal, the position for British charities (let alone British society) could be far worse. Under this scenario, both house and share prices are expected to fall sharply, dragging down legacy values in their wake. According to our legacy market model, under this gloomy scenario, incomes over the next five years would total just £14.6bn – that’s a loss of £1.2bn for good causes.
Of course, there’s very little charities can do to influence the political machinations in Westminster or Brussels. But they need to be aware of the potential risk and factor it into future plans. That might mean deferring big investment decisions, breaking into reserves, or cutting back on the projects they operate.
No-one can say how Brexit will pan out over the next few years. But in the long term, we believe that the outlook for legacy giving is good, thanks to demographic trends and the fundamental generosity of British will-makers.
For legacy fundraisers, our advice is to focus on what you can control – recognise the inevitable short-term instability but concentrate on influencing and inspiring future generations of legacy donors; British people want to do good things with their money and make a difference long after they are gone; Brexit will not change that.
Meg Abdy is Development Director at Legacy Foresight – Britain’s foremost analysts of the legacy and in-memory sectors in the UK. Meg has been analysing the legacy market since 1994, when she coordinated the first ever legacy forecasting project, now known as Legacy Monitor – an 80-strong consortium of the UK’s leading legacy income charities, which last year received £1.5bn in legacy income and 54,000 gifts in wills.
Legacy Foresight shares legacy and in-memory giving insights and research on a regular basis. Their latest report Legacy Market Outlook, which analyses legacy giving now and predictions for the coming five years, is available to request via their website.