What is the threshold for generosity in the UK today?
When you start on your giving journey, one of the hardest questions to answer is: “how much is generous?”
Giving is so personal, and traditionally so private, that there are not really any benchmarks for generosity. Talk to friends and neighbours and you may discover you are doing more than most. Look in the media and you will find so many examples of big philanthropy that you might start to wonder if you are generous at all.
The lack of a shared understanding of what it might mean to be generous in a UK context has resulted in levels of giving that vary hugely among wealthy people – by which we mean from a few hundred pounds to several million. Naturally, everyone feels their own level of giving is generous.
This may be good for the conscience, but is it helpful?
Would it be helpful to have shared understanding of generosity?
In practical terms, an agreed understanding of what it means to be generous might have some real benefits.
Let’s start with the organisations that are receiving gifts from wealthy individuals. When you give, let’s say, £5,000 to a charity you care about, it might feel like a lot of money to you. Of course, it is in absolute terms. Yet a gift of this size might only keep a very small charity running for a few weeks or months. In a large charity, it will be barely more than a rounding error.
This can lead to a mismatch of expectations. Thinly-resourced charities don’t have much time to follow up with donors at the best of times and a donation of this size might not even result in a thank you note. That is not a great feeling for you. It might even seem like bad manners under the circumstances and it is certainly no way to start on a giving journey.
There is a similar problem if you want to get advice or support to make sure your gift does as much good as possible. Gifts at the £5,000 level are not generally big enough to merit much quality time.
An objective measure of what generous giving looks like would be helpful all round to setting and managing expectations to make sure your giving journey gets off on the right foot.
Why does generosity vary so much among the wealthy?
Over the last couple of years we have been working on various data sets to try to answer the question: how much is generous for the UK’s wealthy?
It has not been easy, partly because we have to work with those significant fluctuations of giving within wealth bands. Partly also because, on average, those who are affluent give more as a proportion of their assets than those who are wealthy or very wealthy, which means the only way to construct a generosity threshold is on a continuum for different wealth bands. There is no one-size-fits-all when it comes to generosity.
This giving continuum happens for two reasons. Firstly, people give from their income. Wealthy people may have a lot of money invested, but they will typically only draw down the money they need to cover their lifestyle costs. For most wealthy people, this means they have much more tied up in investments than they have in their bank account and consequently the amount they give may be a high portion of their income, but will be a much smaller proportion of their overall assets.
Secondly, people generally think in absolute terms and not in percentages. So, when an individual considers giving £1,000 it sounds like a reasonable amount, but when someone considers giving £100,000 it sounds like a lot. It doesn’t matter if the person has £100,000 or £10 million in the bank and these gifts would represent 1% of assets respectively, the larger number has a perceived higher risk. This is due to an effect called ratio bias and it means people have a tendency to attribute a bigger risk or reward to a bigger absolute number, even if the ratio is the same.
Is it possible to develop an objective standard for generosity?
Yet, in spite of these challenges – or more accurately because these biases and behaviours are so commonplace among people – it is possible to construct a model showing what it means to be generous for each wealth band.
Expressing the values both as a percentage of wealth and in absolute terms, the model shows that someone with between £250,000 and £1 million of investable assets should consider a gift of 1% of assets to be generous. Depending on the level of wealth, this will equate to between £2,500 and £10,000 of giving each year.
For those with investable assets between £1 million and £5 million, the percentage is 1.1%, or between £11,000 and £55,000.
Someone with between £5 million and £10 million of assets should aim to give 1.2% of their assets each year, or between £60,000 and £120,000, and so on.
Figure 1: The UK’s Generosity Threshold
|Wealth level (£)||Generosity threshold|
% of assets given to be considered generous
|Amount of annual giving (£)|
Source: Beacon Collaborative
The model is based on data from a survey on giving habits that we conducted in 2019 among 1,300 wealthy individuals. We combined this with supplementary data from the Sunday Times Giving List and the Coutts Million Pound Donors Report to ensure we were capturing data from individuals whose giving is known to be generous.
We then used statistical methods to determine objectively what it means to be “generous” at each level of wealth.
Why do we need a starting point for generosity?
It is important to note that these values are the threshold for generosity. In other words, this amount is the starting point for what might be considered to be generous. Within each wealth band there will be individuals who give well above this level for family, religious, cultural or other reasons.
For most wealthy people, however, these thresholds will be a significant stretch from their current levels of giving. In last year’s survey, the median level of giving among wealthy people was £4,000. This means around half of the UK’s millionaires would have multiply their giving by 4x or even 40x for it to reach the generosity threshold, depending of course on how rich they are.
We don’t expect this will happen overnight. It will take time for wealthy people to gain confidence, build relationships and access the support they need to move forward on their giving journeys.
Equally, we don’t want these threshold values to be seen as an expectation or judgement. Giving is a voluntary act and it is important that people are free to give at the levels that are right for their own circumstances, values and beliefs.
Rather, for those starting on their giving journey, we hope the threshold may become an aspiration. For experienced givers, it may be a benchmark that they long-since have surpassed.
For the wider philanthropy sector, however, we hope it creates a shared understanding of what serious giving looks like and feels like for individuals in different wealth bands.
Fundraisers, take note that a £5,000 gift from someone with £500,000 in assets is not to be sneezed at. Wealth advisers should beware that when a client with £5 million considers a gift of £60,000, they will greatly value your support, because this is a big deal relative to their wealth.
And for the philanthropy sector as a whole, if we can give more wealthy people the confidence to donate at these levels, it will be a measure of our success in enabling meaningful giving journeys.