Investing Club Funds
With the decline in interest rates we are frequently asked by clubs where the best place to invest their surplus funds are. We would offer the following advice:
1. The first place to start is the club rulebook and the power of the committee and club to invest surplus funds.
2. Consider the risk of any potential investment. As a club investing member’s funds the committee should adopt a low risk investment strategy with minimum risk of loss of capital. For practical purposes this will limit most investments to banks, building societies, national savings or government bonds.
3. Consider the ‘term’ of the investment and the likelihood that the club will need the funds at a future point in time.
4. Obtain details from banks, building societies, national savings and compare interest rates.
The following point should also be considered:
1. You should ensure the club receives interest gross (without deduction of tax)
2. The club may benefit by discussing their charging structure with their current bank. If agreed funds are left in accounts banks will sometimes agree lower rates of bank charges.
3. Beware of sweep account which transfers surplus funds from a current account to an instant access deposit account. With low interest rates such accounts are paying a fraction of a percent. We have encountered cases where the bank charges for operating these accounts exceed the interest earned. Many clubs would be better served by transferring money into a higher earning deposit account.
4. A number of clubs have invested funds into insurance company or banks ‘investment bonds’. These types of investment are usually unsuitable for clubs for a number of reasons:
5. Funds are protected by the Bank of England deposit protection scheme up to £85,000 per financial institution.
Finally remember that as a rule the higher the return on an investment the greater the risk, if an investment return is too good to be true it usually is. If any client of R H Jeffs & Rowe is in doubt please contact us and we can advice you on the investment advice you have received.