Sector trends

Fundraising: ‘spend-down’ trusts

Charitable trusts with a finite time span can be an effective way to respond to a specific event, such as the coronavirus pandemic.

  • Spend-down trusts provide funding for specific causes within specific timeframes

  • They can take advantage of topical issues and allow for swift fundraising

  • These trusts must spend funds in accordance with a defined scope

Unlike conventional trusts – such as the Esmée Fairbairn and Joseph Rowntree Foundations, which retain the capital sum in the bank and simply use the interest to fund grant-giving programmes in perpetuity – spend-down trusts have a finite time span within which to spend all the money raised. They are often used to tackle a specific cause or disaster, and a number of grant-giving charitable trusts have been set up to help tackle the coronavirus crisis.

A new foundation, funded by UK gas network Cadent, is offering individual grants of between £100 and £100,000 to charities and community groups, while the Thomas Pocklington Trust launched a £500,000 emergency fund to support sight-loss organisations providing services to blind and partially sighted people during the pandemic.

Following a donation of £5m from global video-sharing company TikTok, the RCN (Royal College of Nursing) Foundation launched a subsidiary charity, the Covid-19 Healthcare Support Appeal, aimed at supporting health and social-care workers, including those in clinical and non-clinical roles.

Chief executive of the British Pharmacological Society, Rachel Lambert-Forsyth is a trustee of the RCN Foundation, which focuses primarily on supporting nurses, midwives and healthcare support workers. She says: “The funders specified that they wanted the money to go to the broader healthcare sector, including porters, cleaners and paramedics, etc, so we had to set up a subsidiary spend-down charity to do that. It will provide financial and psychological support – for example, grants for those in financial need, and the funding of funeral costs or counselling – to individuals who need it.”

In a rapid response to an emerging coronavirus crisis, the Covid-19 Healthcare Support Appeal took just three weeks to establish and will start issuing grants, delivered through various other charities, from June onwards. Lord Adebowale, also chair of the NHS Confederation, has just been appointed as its new chair.

“Once the funds are spent down, the charity will be closed, and we expect the money to go fairly quickly as we know that support is needed across all sectors of healthcare,” says Lambert-Forsyth.

A response to an emotional trigger

James Partridge, senior partner at law firm Thomson Snell & Passmore, says: “A sudden disaster, like the coronavirus pandemic, often makes the public open to an emotional response to an appeal to give to charity. The timeframe is often short, and to attract interest the appeal has to be specific to the triggering event, but the amounts raised can be very big and achieve a great deal.”

However, timelines can vary. “With trusts that are set up to serve as a legacy for an event – for example the Spirit of 2012, an Olympics legacy charitable trust – 10 years is not unusual,” says Max Rutherford, head of policy at the Association of Charitable Foundations.

A sudden disaster, like the coronavirus pandemic, often makes the public open to an emotional response to an appeal to give to charity

James Partridge
Senior partner, Thomson Snell & Passmore

Forces in Mind Trust (FiMT) was established in 2012 with a Big Lottery Fund 20-year endowment of £35m, following a successful bid from the Confederation of Service Charities. The size and longevity of the trust reflected the fund’s then strategy of empowering grant-awarding centres of excellence that could bring systemic change, while operating with agility and being unafraid to innovate.

Chief executive, air vice-marshal Ray Lock CBE, says: “Each year around 15,000 people leave the UK armed forces. The vast majority move successfully into civilian life; however, some need additional support, and it is these most vulnerable people for whom FiMT exists to help. The security of a sizeable endowment, matched with the finality of a spend-out date, has led the trust to become increasingly effective in targeting its funding, flexing its power to convene and influencing key policymakers across the UK.”

A key area of FiMT’s work is to ensure that every ex-service person secures satisfying and fulfilling employment. “Demonstrating to UK businesses the tremendous skills and experience that service-leavers bring is a good example of how each facet of this spend-out trust can be deployed to the benefit of the UK economy, as well as the armed forces community,” says Lock.

The means to release money quickly

The choice of spend-down trust over conventional trust often comes down to the difference in the social impact of small amounts of money spread out over time, compared with releasing money sooner – as was the case with the Diana, Princess of Wales Memorial Fund. Established after the death of the princess in 1997, it raised around £140m in donations from the general public, community groups and commercial partnerships, and was closed in 2012.

Founding CEO and former charity commissioner Andrew Purkis says: “If we’d opted for a conventional trust and simply used the interest on the money each year for grants, retaining the original sum in the bank, it would have resulted in a thin dribble of grants each year. We knew people would want that money spent, and it was important for the public that gave some of that money to see that it was going out to her favoured causes.”

Time was another factor in the decision. The use of the princess’s name and reputation was unlikely to last beyond a generation, and the trustees decided on a more concentrated investment in planned initiatives in a few chosen areas that resonated with the memory of the princess; a short-term impact that would create a ripple effect and ensure that those changes would continue.

“You won’t achieve that by dribbling out small amounts over the long term and, overall, you are likely to have locked up all your potential in the bank,” says Purkis. “Many of these trusts are set up for very urgent need now and so it is logical to make It spend out and not become a permanent part of the landscape.”

There are a few limitations

There are some potential downsides to a spend-out trust. If it is set up by a family or company, when the money is gone and the fund is closed, so too have the opportunities for the family or brand name to have a fresh impact and continuing involvement. Opportunities to help new causes that emerge several years down the line may also be lost.

The charity’s trustees have a legal duty, enforced by the Charity Commission, to see that any money raised is applied in the way the original appeal said it would be.

James Partridge says: “When the fund and its allotted timescale come to an end, unless the wording of the appeal leaves scope to do so, it is not legally possible to extend the life of the project or spend the money on other things, even if they are similar to the original appeal and common sense says that the donors would agree.

“If funds remain at the end, and the appeal wording does not allow scope for the trustees to give them to another project, it will be necessary to apply to the Charity Commission for a scheme that makes provision for what is to happen.”

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