Where can I earn more interest on church savings?

Our church has more than £30,000 - resulting from a kind legacy - on deposit with the Central Board of Finance of the Church of England, earning 0.5 per cent interest. We would like to earn a higher rate of interest to help cover our current deficit.

Is there any impediment to placing these funds on a term deposit with a sound commercial bank at higher interest? Are there any restrictions on a church with charitable tax status earning interest? Do you know of any high interest deposit accounts or bonds that would be suitable - one, two or three-year terms - perhaps with a special window for charities and preferably paying interest gross?

Alana Petraske, in the Charities & Philanthropy team at Withers, says you are absolutely right to consider these issues, since the members of a Parochial Church Council (PCC) have a duty to ensure that funds are managed appropriately. A regular review of financial investments is an important element of discharging this duty, which falls to PCC members as "charity trustees".

Broadly, PCC members must take the same degree of precaution as an ordinary, prudent "man of business" would with their affairs. Individual trustees with particular expertise will be held to a higher standard.

The return you are receiving from the CBF Church of England deposit account reflects the fact that this fund is designed to hold assets that may be required in the short term, or possibly at short notice.

The rate may be better than that available on the average current account balance, but if the PCC is able to lock the funds away for longer, then you receive greater returns for this sacrifice of liquidity.

Before proceeding, however, it is important for the PCC to understand the terms on which the funds are held. If the legacy provided the church with an unrestricted gift then you may wish to consider anything that may be known about the donor's intentions for the gift and select prudent investments that also give effect to the spirit of the gift.

If the gift was given subject to a capital restriction, the PCC will want to ensure that the investment approach taken is consistent with balancing the need for current income against capital growth for long-term benefit.

It would be sensible to consider putting an investment policy in place which addresses the PCC's approach to key elements of financial investment, such as risk and return, as well as any relevant ethical limitations.

A policy can help to focus the minds of trustees on the proper discharge of their duties, ensuring that they only contemplate investments that will be "approved charitable investments" and otherwise approach investment decisions properly.

If ethical limitations are relevant to your PCC, the Church of England's Ethical Investment Advisory Group and its Ethical Investment Policy may be an important source of guidance for you. The CBF deposit fund currently holding your gift seeks to reflect the Church's teaching and values on issues such as the environment and climate change, so you may wish to replicate that.

You might also consider whether programme-related investment (PRI) - charitable activity that may additionally provide a financial return - may be an option for your PCC. Loans or equity investments in social enterprises that promote the Church's teaching are one example of a social investment or PRI.

A great resource for you in relation to your church's investments is the Church of England's publication Investing Your Reserves: A short guide for PCCs. In addition, all charities should be aware of the Charity Commission's publication CC14: Charities and Investment matters; whether or not your income level requires your PCC to register with the Charity Commission, you are subject to its oversight and regulation.

You should seek advice from a regulated investment expert on specific accounts or investment products, but in addition to the high street banks and investment houses, you might consider specialist providers to the charity and ecclesiastical sector such as CAF Bank.

~~~~~~

Bruce Crawford, a client investment director at Churches, Charities and Local Authorities (CCLA), which specialises in managing monies on behalf of charities, faith groups and other not-for-profit organisations, points out that churches tend to need a steady, reliable and recurring income stream from their investments. But they also need to hold cash as a reserve for spending on church maintenance that may not be needed for some time.

The advice given is specific to the questions posed. Neither the FT nor the contributors accept liability for any direct or indirect loss arising from any reliance placed on replies.

~~~~~~

I am the main beneficiary of my late wife's will under a "mirror wills" arrangement. I have been considering using a deed of variation to direct some of the estate to our children and grandchildren but my solicitor has advised against it. What are the pros and cons of deeds of variation, as opposed to simply inheriting the assets under inter-spousal exemption and then distributing them myself - perhaps using potentially exempt transfers or gifts into trust?

You can leave answers using the comment facility at the bottom of this article, or email [email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation