Charity legacy income could shrink by more than a quarter this year because of the effects of the coronavirus pandemic, experts have predicted.
The charity legacy consortium Legacy Foresight said at the end of March that legacy income could fall by between 3 and 9 per cent over the following year because of the Covid-19 outbreak.
But the latest figures from the consortium estimate that legacy income, which was worth £3.2bn in 2019, could shrink by between 8 and 27 per cent this year because of the virus.
Legacy Foresight said that between 5 and 10 per cent of bequests it would normally expect to be notified to charities in 2020 could be delayed because of administrative difficulties caused by Covid-19.
Charities’ legacy income is expected to decrease even more this year than previously forecast, by up to 27%.
Legacy consortium Legacy Foresight has revised its projections to account for the severity of the coronavirus crisis. While legacy income was originally expected to grow in 2020, in March the organisation predicted it could drop by up to 9% compared to the year before as a result of the crisis.
It is now projecting a more significant decrease, between 8% and 27%. The new estimate takes into account a worsened economic outlook, which translates into lower gift values, together with a higher number of deaths and worse-than-expected administrative challenges.
Legacy Foresight said: “Emerging anecdotal evidence suggests that the impact on solicitors, charities and government departments’ capacity to process charitable bequests is more severe than previously assumed.”
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Legacy Foresight has updated its projections of the impact of the coronavirus on UK legacy incomes to take account of the latest available economic, demographic and administrative evidence.
All these factors have deteriorated since the last forecasts were produced at the end of March, with economic commentators generally more pessimistic than a month ago, a higher number of UK deaths than previously predicted, and the impact on solicitors, charities and government departments capacity to process charitable bequests more severe than previously assumed.
This suggests that there will be a more dramatic decline in legacy incomes over the coming year. However, the negative impact is expected to be relatively short-lived, and Legacy Foresight’s forecasts for the next five years continue to suggest market growth, with legacy incomes ending the five years 13% to 18% up on 2019 levels.
Legacy income could decrease by up to 9% this year because of the coronavirus crisis, according to Legacy Foresight.
The legacy consortium has revised its five-year forecast to account for the pandemic and accompanying restrictions, and says it expects legacy income to fall between 3% and 9% in 2020. Worsening of the overall economic outlook is expected to impact share and house prices and drive down the value of legacy gifts.
The lockdown also comes with a series of administrative challenges, both for the services charities rely on to process legacy gifts and for the property market. In the long term, Legacy Foresight still expects the legacy market to grow from today’s £3.2bn to between £3.7bn and £3.8bn in 2024. This is between 1.6% and 4.5% less than previously projected. See more here.
Updated forecasts from Legacy Foresight say legacy income is still likely to grow in the next five years, but will probably fall somewhere between 3 and 9 per cent this year because of the pandemic
Legacy income could fall by up to 9 per cent this year as a result of the coronavirus pandemic, according to the charity consortium Legacy Foresight.
Legacy Foresight’s updated legacy market forecasts estimate a likely fall of between 3 and 9 per cent over the next year, although it still expects legacy income to grow over the next five years.
The pandemic will have an impact on the value of bequests, the forecast says, because bequest values are driven by economic factors such as house prices, share prices and GDP growth rates, all of which have been pushed down by coronavirus.
The death rate might also become more volatile over the next year as a result of Covid-19, and illness and restrictions could mean that the administrative process through which charities claim bequests might be slowed down.
Charity legacy income currently sits at £3.2bn a year, according to Legacy Foresight, and is expected to rise by between 14 and 19 per cent to between £3.7bn and £3.8bn by 2024.
But this will be between 1.6 and 4.5 per cent lower than Legacy Foresight’s previous projection, made in February 2020, before the impact of coronavirus was being felt fully in the UK.
Jon Franklin, an economist at Legacy Foresight, said: “While there is a high degree of uncertainty related to any projection for how the current situation in the UK could evolve over the coming months, these forecasts set out to support charities in assessing what this could mean for their legacy incomes.”
Franklin said that, although the prediction for the immediate fall in income would range from 3 to 9 per cent, he believed the bigger drop was the “most likely”.
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Legacy income is set to increase by 3.6 per cent per annum over the next five years.
According to revised forecasts by Legacy Foresight, legacy income will rise from £3.2 billion in 2019 to £3.9 billion in 2024.
During the summer of 2019, Legacy Foresight had predicted that legacy income would rise by around 3.3 per cent per year. However, following higher Office for National Statistics (ONS) predictions on the number of UK deaths.
The ONS believe deaths will rise from 600,000 per year in the present to 645,000 in 2024. This should lead to an inevitable rise in legacy gifts from 120,000 per year to 130,000 by 2024.
The additional increases are dependent on the continued economic recovery. Based on the current trajectory created by a clear Brexit outcome, UK GDP is set to rise by 1.7% from next year with house prices increasing by 3.6% per year – a considerable improvement on the subdued 0.4% growth in 2019.
“For now, legacy market growth will not return to the levels seen in the run-up to Brexit when incomes were growing at 4.1% per year. However, at a time when many charities are reporting flat or falling donations, these forecasts are welcome news for fundraising teams across the UK.”
Legacy giving will be worth £500m more than previously forecasted over the five years between 2019 and 2024, Legacy Foresight has said.
The legacy consortium has adjusted its predictions to account for the higher number of deaths forecasted by the Office of National Statistics (ONS) and for post-Brexit economic conditions. Last year, Legacy Foresight projected legacy income to grow by 3.3 per cent year on year between 2019 and 2024. It now forecasts a 3.6 per cent yearly growth that will increase the value of legacy giving from £3.2bn a year in 2019 to £3.9bn in 2024. Legacy Foresight says this means that “cumulatively, based on these new forecasts, UK charities will receive £500m more over the five years than previously thought”.
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