Legacy income is expected to reach a record £4bn this year despite the challenging economic climate, according to a new report by Legacy Foresight.
The report, Legacy Market Briefing 2022, showed that legacy income is on track to increase by 14% by the end of the year compared with 2021.
The increase is largely attributed to a buoyant housing market in the past two years and progresses made to reduce the backlog of probate cases at HM Courts and Tribunals Service.
However, Legacy Foresight predicted that falling house prices will result in the average value of residual gifts dropping by about 3% between 2022 and 2024.
Strong year for legacy income
The report showed that legacy income has increased by 4.4% per annum since 1991, when it was £0.8bn, to £3.5bn last year.
It predicted income to grow to £4bn by the end of the year and remain static until 2024 before growing to £4.4bn by 2027.
The housing market is expected to fall by more than 10% in the next two years, which in turn will lead to the average bequest values dropping by around 3% over the same period.
“Legacy incomes fluctuate in line with the economy – during periods of growth we tend to see legacy incomes rising rapidly and when the economy struggles, legacy income growth tends to slow,” the report said.
“However, despite having faced recessions, global financial crises, house price crashes and years of government austerity, legacy income has proven relatively resilient – income has fallen in just six years out of the last 30 years.”
According to the Office for National Statistics, nearly 700,000 deaths will occur annually by 2030. This represents 100,000 more deaths that seen pre-pandemic and more than the additional deaths happening each year during Covid-19.
The report predicted that between 2023 and 2027, the increase in the number of deaths will result in bequests received by UK charities rising by around 11% compared with the previous five years.
“The growth in the number of gifts driven by the expected increase in the number of deaths, is likely to largely offset the impact of reduced average values,” it said.
Trends vary based on charity size, age and sector
Incomes charities receive can vary ‘significantly’ depending on factors such as size, age and sector.
Newly established charities tend to see the fastest growth, “albeit from a low base”, with the average charity in the top 1,000 legacy charity group receiving £1.2m per annum in legacy income.
Over the last ten years, medium legacy charities (£1-10m legacy income) and large ones (£10-25m legacy income) have reported the fastest growth rates at 6.0% per annum and 4.5% respectively.
Meanwhile, the fastest growing sectors appear to be international development, armed forces and conservation and health charities. Children and disability sectors are the slowest growing.
Legacy income ‘crucial’ in challenging times
Jon Franklin, economist at Legacy Foresight, said: “The turbulence of the last 12 months with the war in Ukraine, cost-of-living crisis and rising inflation has caused many charities to be concerned about the future of income.
“Although in the near term we’re more cautious about the outlook for legacy income over the next five years, we expect negative impacts to be short lived, and to see a return to growth after 2024, driven by rising bequest numbers and a steadying of the housing market.”
He added: “These are understandably worrying times for all, the non-profit sector included. However, our forecast shows the remarkable resilience of the legacy sector, and how charities must continue to invest in legacy fundraising as one of the most reliable sources of income to carry out their vital work.”
Commenting on the report, Lucinda Frostick, director of Remember A Charity, said: “In troubled times, the steady bedrock of legacy income is all the more crucial. This forecast highlights just how important it is that we continue to work together to keep legacies front-of-mind for supporters, and within charities too.
“The value of legacy donations may well take a hit in the short-term, but if the focus remains on stewarding supporter relationships and delivering sensitive, inspiring legacy fundraising, the outlook for longer-term growth is considerable and income from gifts in wills really will be a lifeline for an increasing number of charities.”
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