Charities are struggling to deliver services because of low interest rates

16 June 2009

Interest ratesCAF Bank, the not-for-profit bank run for charities, has today published the results of a survey of 280 charities that reveals 42 per cent of charities are struggling to deliver services because of low interest rates. The survey also shows that low interest rates are forcing almost half (45 per cent) of charities to dip into their savings or reserves to deliver essential services which is further weakening the finances of charities who are already facing fundraising pressures.

CAF Bank is a wholly owned subsidiary of the Charities Aid Foundation and a leading provider of banking services to charities. It has over 15,000 customers and a market share of eight per cent.

Commenting on the survey’s findings Peter Mitchell, Chief Executive of CAF Bank said: “Interest rates have plummeted as the Bank of England has waged war on recession and the plight of savers and pensioners has been well documented. Our survey reveals that charities are the latest innocent victims of the financial crisis and the vital services they deliver are being impacted by historically low interest rates.”

Alongside the impact of low interest rates the survey shows that almost a fifth of charities (17 per cent) have said their high street bank has increased charges since the financial crisis began. Bank charges are an important consideration for charities because additional research undertaken by CAF Bank reveals that a typical small or medium sized charity would need to earn at least 3.24 per cent interest to offset a typical high street banks annual charges*.

 
Average Balance
Monthly Charge
Annual Charge
Interest rate required
Lloyds Business Extra Tariff
£15,000
£40.50
£486.00
3.24%
RBS Standard Business Tariff
£15,000
£47.31
£567.72
3.78%
CAF Bank
£15,000
£0.70
£8.40
0.06%

The survey into charities’ attitudes to banking since the financial crisis also found that while the majority of charities accept that the Government’s bail out of the high street banks was necessary (68 per cent), less than half (45 per cent) feel that their money is safer because of action taken by the Government.

Peter Mitchell added: “In a low interest rate environment I believe that charities should consider whether the best value comes from time spent chasing nominal rates of interest or from seeking a bank that doesn’t impose high charges.”

Charities can bank for free with CAF Bank. As a not-for-profit organisation any surplus CAF Bank generates is donated back to CAF. It is estimated that in the last year the benefit of CAF Bank’s approach of paying competitive rates of interest combined with low charges was worth over £20m to the charity sector.

*Illustration based on transaction levels of a typical small or medium sized charity customer maintaining a balance of £15,000 who undertakes the following banking transactions charges each month:

  Volumes
No. of accounts     1
Cheques issued per month  10
DDR payments per month      5
Standing order payments per month 3
Other debits per month       15
Credits paid in per month 6
Cheques paid in per month 40
Electronic credits received per month 5

Notes to Editors

1. The online survey was responded to by 280 charities from across the UK between 1 and 15 May 2009.

2. CAF Bank is a wholly owned subsidiary of the Charities Aid Foundation and is governed by its own independent Board of Directors, all of whom serve on a voluntary basis. It is authorised and regulated by the Financial Services Authority and is a participant in the Financial Services Compensation Scheme.

3. The Charities Aid Foundation (CAF) is a charity set up to help other charities by working with donors, companies and charities to encourage and facilitate a culture of giving. They do this by offering products and services that make giving easier, tax efficient and help charities to make the most of donations through their banking and fundraising support services.

Media contacts

James Ketchell
Press Officer
Charities Aid Foundation
T: 0207 832 3022
E: pjones@cafonline.org

Perry Jones
CAF Bank
T: 0207 832 3012
E: pjones@cafonline.org