The advantages of charitable giving sadly often get overlooked, both by financial advisers and their clients.
Charitable giving, with tax relief, may do more for society than some flavour du jour unproven venture capital trusts, all too often used as the first port of call for higher rate taxpayers maxed out on pension allowances.
A gift of a few hundred pounds could be a vital lifeline to local and start-up charities, it is also fun to get personally engaged and see the impact of your donations over the years. For IFAs, supporting local charities can attract new clients, improve your reputation, and bring more job satisfaction.
Will they be the richest people in the graveyard? That is not necessarily something to be proud of. Yet, this is a real danger.
Why not start up a payroll giving scheme? Here, employees can use a payroll giving scheme to set up charitable donations directly from their wages to charities of their choice from the 185,000 charities registered in England and Wales (and a further 24,000 in Scotland).
Payroll giving works like salary sacrifice and saves the charity administrative costs, since they do not need to claim back the tax paid through Gift Aid – it is included in the donation. If you are feeling generous, you can choose to match your employees’ charitable donations.
Will your clients be the richest people in the graveyard?
More importantly, what about your clients? Will they be the richest people in the graveyard? That is not necessarily something to be proud of. Yet, this is a real danger.
This week HMRC revealed inheritance tax receipts soared to £5.3bn (April 2022 to December 2022 receipts) – a huge £700mn higher than in the same period a year earlier.
Too many are unduly cautious, even miserly, living a too frugal retirement, scared that their often vast pension pots will run out before their days are done.
Surprisingly, this gargantuan tax revenue is not solely due to runaway house prices, even though Halifax data shows they have gone up a staggering 974 per cent since early 1983 in just 40 years. Property only accounted for half the wealth in London estates paying IHT compared to just one-third (32 per cent) for the rest of the UK, according to a Just Group FOI.
While most under 50s face pensions penury, unless auto-enrolment contributions rise, the reverse is true for some baby boomers. Many in quite ordinary jobs have index-linked defined benefit schemes and also significance assets in housing, Isas and other products.
Have you informed these clients about the advantages of philanthropy?
Retirees’ greatest fear
For retirees, with modern DC pension pots, their greatest fear is that their money will run out before their days are done if they withdraw too much capital. This is especially true in the inevitable downturns when both investors’ capital and income may be dented without careful management.
And people are living longer; according to the Office for National Statistics, a 65-year-old woman can expect to live until she is 87, while a man of the same age could expect to live until 85. So, their assets really have to sweat for a marathon of two or three decades, possibly longer.
There are social security perks too. Most advisers tell their clients about pension perks.
