Could charities benefit from recent changes to pensions?
In April 2015 the Government made a number of important changes to how people can access their pensions. Under the new rules, anyone aged over 55 now has total freedom over how and when they access their pension – including taking 25% as tax-free cash.
There has been a lot of coverage of this issue in the national press, with luxury goods manufacturers hoping that eligible people will be tempted to splurge their hard-earned pensions on a flash car. There’s been surprisingly little coverage however within the charity sector of the implications of this move for fundraising – and in particular for legacies.
Over the last few months at ChangeStar we’ve been thinking about how our charity clients can talk to their legacy prospects about freeing up some of their legacy gift before they die – as this could not only benefit the charity (definitely having the money now is better than possibly having it sometime later, right?) but could also be a wonderful chance for these ‘living legators’ to see the impact of their gift in action and get a great sense of fulfilment from their contribution to the world.
The person’s ‘living legacy’ could then of course be followed by their actual legacy at the end of their life – and the impact of the living legacy may even give them the evidence or fulfilment they need to commit more firmly to a legacy or a larger one.
It would seem that a living legacy could give people tax advantages too – if they donated money while they were alive, this could remove some of the burden of inheritance tax when they die. Clearly issues like this concern a slightly more affluent section of the population – but it’s a section that charities are desperate to target.
And with the advent of these pensions changes, now seems like a good time to try this approach of seeking ‘living legacies’, as it would mean that more people had access to funds to use for this purpose, provided they had calculated that they had money spare beyond their living costs provided by their pension*.
So, let’s consider how we can give people a chance to see some of their legacy in action – so that we not only maximise their impact on good causes but also enable them to do something special in their own lives.
*Needless to say, charities would have to be responsible in how they communicated to donors about this issue and how they discussed this type of decision with donors.