UK donor-advised funds

post by Henry_Stanley · 2020-01-22T12:03:12.285Z · score: 19 (8 votes) · EA · GW · No comments

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    10 matthew.vandermerwe
    9 Tobias_Baumann
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Does anyone know about donor-advised funds for UK taxpayers? The only ones I've been able to find seem to charge large management fees, or have a prohibitively large minimum investment.

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answer by matthew.vandermerwe · 2020-01-22T14:22:32.513Z · score: 10 (4 votes) · EA(p) · GW(p)

I spent an hour or so looking into this recently, and couldn't find any DAFs that were suitable for small donors. It's possible I missed one, though.

CAF offers a 'giving account', which is effectively a low-interest savings account. You can get immediate tax relief for deposits, but forgo returns, and can only donate to UK registered charities, so seems like a weak option: https://www.cafonline.org/docs/default-source/personal-giving/2573h_charityacc_web-app_pdf_220519.pdf

FWIW my tentative conclusion was that the best option for savings small-ish sums for giving later is a straightforward ISA. You don't get any immediate tax relief from paying into the ISA (you'll get this when you donate the money to charity) but you do get (tax-free) growth, and retain flexibility in when and how the money is donated. Returns are important if you think you might wait a long time before giving, flexibility seems important if one's motivation for giving later is the possibility of some high-leverage opportunities in the future. The main downside is that you can't easily bind yourself into future donations this way, but I thought this was outweighed by the other factors in my own case.

comment by Henry_Stanley · 2020-01-22T14:45:51.211Z · score: 6 (1 votes) · EA(p) · GW(p)

Hm, the fees on the CAF account look pretty steep - seems like it eats 4% of everything you put in there up to £22k, and 1% thereafter.

comment by matthew.vandermerwe · 2020-01-22T16:21:15.798Z · score: 7 (2 votes) · EA(p) · GW(p)

Yeah - plus the opportunity cost of having it in cash. Looks like a non-starter.

comment by Henry_Stanley · 2020-01-22T14:38:51.749Z · score: 2 (1 votes) · EA(p) · GW(p)

You don't get Gift Aid until you actually make the donation

If you don't donate in a given tax year you won't get the Gift Aid for that tax year at all, if I understand right - the tax relief is lost.

The appeal of a DAF is you can claim the Gift Aid/tax deduction immediately but defer donating. I think you can also put securities in the DAF, so growth on it would be tax-free presumably.

comment by matthew.vandermerwe · 2020-01-22T14:41:22.141Z · score: 7 (2 votes) · EA(p) · GW(p)

Yes that's what I meant - will edit for clarity

comment by Henry_Stanley · 2020-01-22T14:43:35.492Z · score: 6 (1 votes) · EA(p) · GW(p)

Gotcha. Thanks for the answer - I guess UK DAFs will only ever allow you to donate to UK charities, so maybe the lack of flexibility isn't worth it.

comment by matthew.vandermerwe · 2020-01-22T16:18:55.192Z · score: 3 (2 votes) · EA(p) · GW(p)

Yeah, and how much you value the flexibility depends on what you expect to donate to.

EA Funds already allows you to donate to small/speculative projects, non-UK charities, etc, via a UK registered charity, so 'only ever donating to UK charities' is less restrictive than it sounds..

answer by Tobias_Baumann · 2020-01-22T15:12:34.138Z · score: 9 (3 votes) · EA(p) · GW(p)

I looked into this a while ago and ended up with a similar conclusion. The main options (to my knowledge) are NPT-UK, Prism the Gift Fund, and CAF's giving account.

Their fees all seemed too high for me to actually open a DAF (although sometimes it's not transparent and you're just supposed to get in touch). In particular, yearly fees eat up a significant fraction of the money if you leave it in for decades, so it seems unsuitable for such plan. It's probably so expensive because there are relatively few people who are interested in such accounts, and there is a lot of administrative work done by the fund (Gift Aid etc.).

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