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The voice of Scotland’s vibrant voluntary sector

Published by Scottish Council for Voluntary Organisations

TFN is published by the Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh, EH3 6BB. The Scottish Council for Voluntary Organisations (SCVO) is a Scottish Charitable Incorporated Organisation. Registration number SC003558.

Looking after cash and investments

This opinion piece is almost 7 years old

Heather Lamont, CCLA client investment director, gives advice on how to make sure your money is safe

Make sure your cash is safe

That may sound obvious, but the rules affecting deposits have changed. Should your bank or building society get into difficulties, it’s not safe to assume that you will get your cash back regardless. The new 'bail in' regime aims to ensure that next time round, the taxpayer doesn’t have to foot the bill for rescuing a finqancial institution, especially not if the bond holders and depositors who've been enjoying interest payments from said institution get their capital back without any loss.

So particularly if you have more than the Financial Services Compensation Scheme limit (currently £85,000), you need to think about where your cash is, and whether you need to spread it around to avoid too much exposure to any one institution. If keeping on top of the paperwork for multiple accounts and juggling deposits between them is too much hassle, look at cash deposit funds (there are some specifically for charities) which will do that for you.

Heather Lamont
Heather Lamont

If you've got longer term reserves, make good use of them

Well managed organisations don’t run out of cash. The bank balance will rise and fall, but when did it last fall to zero? Chances are there’s a minimum level that you never drop below (it may even be the level mentioned in your reserves policy).

But every year that cash sits in the bank, it’s losing some of its real value because of inflation; and to maintain the spending power of your reserves, you may have to top them up from future years’ budgets.

So rather than hold everything as cash, you’d probably be better off putting at least part of the bit that’s always there into investment assets such as company shares, property and infrastructure. These should give you many times more income each year than you can get on bank deposits, and unlike cash they can be expected to grow in value over time.

Size doesn't matter...

Longer term investments are just as accessible for small organisations as for large ones. You can buy into one or more of the specialist pooled funds for charities with an initial investment as low as £1,000. These can give you access to an all-round portfolio that’s targeting the right investment objectives for your organisation, at very reasonable cost and without creating a new burden for your staff and trustees in administration and reporting.

And although you wouldn’t want these investments if you weren’t thinking pretty long term, that doesn’t mean that you’re locked in – most funds will allow you to add to or withdraw from your investment weekly if not daily, so there’s plenty of flexibility if your plans change.

...but your reputation does

Pooled funds are the sensible choice for charities looking to access long term investments efficiently, but it’s wise to consider how well aligned a particular fund is to your organisation’s values and mission.

Gone are the days when charities could claim to have an effective ethical policy in place because they excluded direct investment in certain companies, while ignoring what was going on under the bonnet of any pooled funds in their portfolios.

Fortunately there is now a wide range of funds with a variety of ethical and responsible policies, including some that offer portfolios designed especially for charities. There is at least one to meet the needs of most charities, and a sensible ethical policy doesn’t mean that you’ll be sacrificing financial returns.

Heather Lamont is a client investment director at CCLA, one of the UK’s leading managers of investments for charities, churches and local authorities.