19 February 2025
As the first daffodils of spring emerge, symbolising renewal and growth, UK charities have a timely opportunity to reassess their cash management strategies. With rising financial pressures and an evolving banking landscape, many charities hold significant cash reserves that could be generating far better returns.
Recent analysis from independent consultancy Broadstone1 reveals that UK charities with an annual income of at least £500,000 collectively own £250 billion in assets, of which £31 billion sits in cash. This underscores a crucial question: how can charities ensure that their cash balances are working as hard as they do?
The financial pressures on charities
The charity sector faces mounting financial challenges. The closure of bank accounts, increased demand for services, and reductions in local authority funding have forced many organisations to dip into reserves or seek alternative income sources. Furthermore, banking services for charities have been widely criticised. According to the Charity Commission2, 42% of charities reported experiencing poor service from their banks over the past year.
At the same time, many charities continue to park their cash in high street bank accounts that offer minimal returns. With inflation eroding the value of stagnant funds, there is an urgent need to explore more effective cash management options.
The cost of inaction
New data from the Bank of England, published by the Financial Times on 14 February 20253, reveals that over £276 billion was held in UK accounts earning zero interest as of December 2024. Experts warn that many account holders may not even realise how much their rates have dropped over time, allowing inflation to steadily erode their funds.
For charities, the cost of inaction is significant. While interest rates remained low for years, the recent financial climate has dramatically shifted, making it more rewarding than ever to seek higher-yield alternatives. By reviewing their cash management strategies, charities can generate additional income that can be reinvested into their vital services.
Unlocking higher returns: an alternative to low-interest accounts
Cash is the most familiar and liquid asset, essential for the daily operations of charities. However, while holding cash is necessary, keeping it in low-yield accounts is not. Many charities may be unaware that alternative options, such as common deposit funds, can offer higher, and currently, inflation-beating returns with low risk while maintaining easy access to capital.
The Financial Conduct Authority4 has been actively encouraging savers to seek better interest rates, highlighting the benefits of switching to more competitive savings accounts. This advice is particularly relevant for charities, which must balance the need for financial security with the responsibility of maximising resources.
Common deposit funds designed exclusively for charities and charitable organisations, present a compelling solution. These funds invest cash across multiple carefully screened banks and financial instruments, to reduce risk. They aim to keep capital secure, provide liquidity and generate competitive returns.
A call to action: make your money work harder
Just as the daffodils remind us of nature’s resilience and renewal, they should also serve as a prompt for charities to rejuvenate their approach to financial management. Now is the time for trustees, treasurers and finance managers to take action by exploring more effective ways to manage their cash reserves.
By switching to higher-interest accounts or using common deposit funds, such as the COIF Charities Deposit Fund, charities can increase their income and ensure that every pound works as hard as they do in delivering essential services. Spring is a season of new beginnings — let it be a season of financial renewal for charities across the UK.
1 UK Fundraising (June 2024), ‘Charities urged to consider investing with data showing around £31bn of assets held in cash’, online at https://fundraising.co.uk/2024/06/04/charities-urged-to-consider-investing-with-data-showing-around-31bn-of-assets-held-in-cash/
2 Civil Society Media (May 2024), ‘Banks criticised by regulator as 42% of charities report experiencing poor service’, online at https://www.civilsociety.co.uk/news/banks-criticised-by-regulator-as-42-of-charities-report-experiencing-poor-service.html
3 Financial Times (February 2025), ‘£276bn held in UK bank accounts that pay no interest’, online at https://www.ft.com/content/78e93590-2f73-4602-86aa-2fbce4c84ad2?shareType=nongift
4 Money Marketing (February 2024), ‘FCA launches campaign to encourage savers to switch accounts’, online at https://www.moneymarketing.co.uk/news/fca-launches-campaign-to-encourage-savers-to-switch-accounts/#:~:text=The%20Financial%20Conduct%20Authority%20(FCA,for%20a%20better%20savings%20rate
Important information
Returns are not guaranteed and are subject to change. Past performance is not a reliable indicator of future results. The value of investments and the income derived from them may fall as well as rise. Capital is at risk and you may get back less than you invest. Under Money Market Fund Regulation, the COIF Charities Deposit Fund is categorised as a short-term Low Volatility Net Asset Value (LVNAV) Money Market Fund. A deposit in the fund is not the same as making a deposit with a bank or other deposit taking body and is not guaranteed. Although it is intended to maintain a constant net asset value, there can be no assurance that it will be maintained. The COIF Charities Deposit Fund does not rely on external support for guaranteeing the liquidity of the fund or stabilising the net asset value. Issued by CCLA Investment Management Limited, authorised and regulated by the Financial Conduct Authority.