Coronavirus impact could see legacy income fall by 9% this year
Melanie May | 31 March 2020 | News
Legacy income could drop by up to 9% this year as a result of the coronavirus pandemic, according to Legacy Foresight.
Legacy Foresight has updated its legacy market forecasts in light of COVID-19 to assess how the pandemic and the ensuing restrictions, will affect the UK legacy market over the coming five-years.
Its forecasts suggest that COVID-19 and the measures in place are likely to affect the UK legacy market in three key ways:
- Economic: With average bequest values driven by economic factors, including house prices, share prices and GDP growth rates, as the economic environment worsens, bequest values are likely to be lower than anticipated
- Demographic: The number of bequests received by charities reflects trends in numbers of deaths, which fluctuates year on year. COVID-19 has the potential to add significantly to this volatility throughout 2020 and 2021
- Administrative: Restricting access to workplaces is likely to put pressure on the various administrative functions charities depend on to receive legacies, while the advice to avoid moving home will slow the sale of key assets from estates, which likely defers the flow of legacy income to future years
Legacy Foresight has developed two scenarios that suggest that legacy income could fall by between 3% and 9% in 2020. This drop reflects the worsening economic environment and the delays in receiving notifications and sale of assets from estates caused by the disruption to administrative processes while COVID-19 control measures are in place.
However, as administrative delays unwind, and income starts to flow from the anticipated increase in bequests, income could rise quite rapidly during 2021 and 2022, and over the five years of the forecast, legacy income is still expected to grow; from £3.2bn today, rising by 14%-19%, to reach between £3.7bn and £3.8bn by 2024.
Taking the five years as a whole, Legacy Foresight now expect 1.6% – 4.5% less income than projected in their February 2020 forecasts, due to the far more pessimistic outlook for house prices and share prices over the period.
Jon Franklin, economist at Legacy Foresight, commented:
“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.
“The scenarios outline a plausible range of outcomes but, on balance, we believe that outcomes towards the lower end of the income range are most likely. We will monitor developments relating to COVID-19, the economy and estate administration processes in particular over the coming weeks.”Advertisement
Commenting on the revised forecast, Rob Cope, Director of Remember A Charity, said:
“The coronavirus is likely to have a significant impact on each and every charity. For those that rely on legacy income, we are seeing not only a major threat to future income, but that the current flow of income from gifts in Wills has effectively been switched off mid flow. The sale of property, stocks and shares are all in limbo, with social distancing making it all the more challenging for estates to be finalised and legacy gifts from being passed on to charities named in Wills.
“At the same time, the sector is seeing a huge surge in public demand for charitable Wills. Although it’s an incredibly challenging time, if we continue to see charities doing what they do best – supporting their communities (beneficiaries and donors alike) – they will be in the best possible position to recover, working together to inspire the nation to ensure charities’ work lives on by leaving a gift in their Will.”
About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.