Trends & data analysis

Legacy income update

17 February 2016

What is the current value of legacy income to UK charities?

Legacy income is increasing and is now worth in excess of £2.24bn according to the latest data available from the Charity Commission and Charity Financials. Of organisations which have more than £500k of total annual income, over a fifth receives income from legacies.

As the figure below illustrates, legacy income has increased more dramatically in the last three years which was preceded by a period of relatively flat annual legacy income of around £1.8bn lasting over five years. The figure also illustrates the number of organisations which make up the annual values and examining the latest period it can be seen that the number of organisations has fallen, but this is not due to less organisations receiving legacy income but rather the data for the latest period is still being complied.

With this in mind we therefore expect both the number of organisations and the values of legacy income to increase from the figures illustrated below.


 

What is causing the increase in the values? Are more people making legacy bequests in their wills?

Smee & Ford read through every will which will go through probate (around 250,000 per annum) and record all mentions of charitable content in the will along with some details of the deceased.

An examination of this data shows that the number of people leaving charitable bequests in wills is not necessarily increasing. Annually there are between 31k and 37k charitable estates identified by Smee and Ford on an annual basis. As mentioned above legacy income from such bequests in wills has increased year on year over the past three years but an examination of the number of estates has decreased over the same period year on year as shown in figure below.

In 2013 Smee and Ford identified 36,896 charitable estates which then dropped to 34,810 in 2014 and 31,585 in 2015.

So if the number of charitable estates has decreased how is it that legacy income has increased?

This is partly explainable by the valuations of the deceased estates and the way bequests are made in wills. Legacies can be pecuniary, fixed amounts of money bequeathed to an organisation or residuary whereby a percentage of the estate value is bequeathed. In the latter scenario the greater the value of the estate then the higher value of the donation.

Figure 2 below illustrates the aggregate value of charitable estates and from 2010 it has steadily increased.

In 2015 it dropped slightly from £13.19bn to £13.13bn but this is in conjunction with a fairly significant drop in the number of charitable estates. The value of estates is rising and in 2008 the average charitable estate was £311,693.

In recent years average charitable estate values have increased from £346,614 in 2013 to £379,085 in 2014 and to £415,600 in 2015.

Much of this increase is attributable to the rising values of the property market with property making up the bulk proportion of the majority of estates. Latest figures show that the average price of a home is currently £196,829 compared to £176,491 two years ago. Over the same period, monthly change in the house price index has been positive every month except one, the last negative change witnessed in September 2014.


 Over the past few decades there has been a significant fall in the number of annual deaths due to people living longer. There were 659,101 in 1983, 658,194 in 1993 and 612,085 in 2003. Last year there were 555,663 deaths in the UK and although the number of annual deaths has been decreasing the proportion of charitable estates has slowly increased to around 6.4%.

Latest figures from the Office of National Statistics however, show that in 2015 there were more deaths than usual in England and Wales equating to 27,000 extra deaths. The year on year rise to 528,340 deaths, is the highest year-on-year rise since 1968.

Such an increase is surely to have an impact on these results once the data is collated by Smee & Ford.

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Mark Pincher

Mark Pincher is data editor and development manager for Charity Financials and Smee & Ford.

www.charityfinancials.com | www.smeeandford.com

 

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