New regulations and guidance for charity trustees

Posted on
The Charity Commission has published their new regulations and guidance for trustees on adopting a total return approach to the investment of the charity's permanent endowment.

Section 4 of the Trusts (Capital and Income) Act 2013 came into force on 1 January 2014 and amended the Charities Act 2011. It will give permanently endowed charities in England and Wales the power to adopt a total return approach to investment.

The Charity Commission will have a regulatory interest where there is mismanagement or maladministration or there is a need to protect property held for charitable purposes.

The guidance defines the key features of the Regulations as follows:

  • "Adopting a total return approach
    Trustees of permanently endowed charities are able to adopt the power to use a total return approach by their resolution if they consider it is in their charity's interest to do so"
  • "Spending or reinvesting total returns
    Trustees can decide to use unapplied total return as an income, but they may also reinvest it in the investment fund subject to the terms of the Regulations"
  • "Spending some of the investment fund
    Trustees of permanently endowed charities are able to release a limited amount of their investment fund to the income fund. The amount released will be subject to recoupment"
  • "Replacing existing total return powers
    The Regulations allow trustees to discharge any total return Orders that the Charity Commission have already made if they wish to adopt the new power conferred by the Charities Act 2011 and set out in the Regulations"
  • "Withdrawing from total return
    In exceptional circumstances, trustees may decide to return to the standard rules if it is in the interest of their charities to do so"

Key action points:

  • Trustees of charities with permanent endowment should familiarise themselves with these changes. If you have any questions or concerns please contact us.
  • You can view the Charity Commission's guidance here.