Investing Club Funds
Clubs frequently ask where surplus funds should be placed once day-to-day cash requirements have been met. While interest rates have risen in recent years, the underlying principles governing the investment of club funds remain unchanged. Committees are responsible for safeguarding members’ money, and their primary duty is the preservation of capital, not the pursuit of higher returns.
Before any investment decision is taken, the club’s rule book should be reviewed to confirm that the committee has the authority to invest surplus funds and to identify any restrictions that may apply. Some rule books limit the types of institution that may be used or require member approval for certain investments. No funds should be invested unless the proposed arrangement is clearly permitted by the club’s rules.
In considering how surplus funds should be held, committees should adopt a deliberately low-risk approach. Members’ clubs are not investment vehicles, and exposure to capital loss should be minimised. In practice, this will normally restrict suitable options to banks and building societies, National Savings products, or other government-backed arrangements. Investments involving market risk, complex structures or speculative elements are rarely appropriate.
The likely term of the investment is also important. Committees should consider how long funds are genuinely surplus to requirements and whether they may be needed at short notice for repairs, refurbishment or unexpected expenditure. Even where longer-term deposits are used, sufficient funds should remain readily accessible to ensure the club can continue to operate smoothly.
Interest rates and terms should be compared across a range of banks, building societies and National Savings products. Where balances are significant, consideration should be given to spreading funds across more than one authorised institution in order to manage risk and remain within deposit protection limits.
From time to time, clubs are encouraged to invest in insurance company or bank “investment bonds” or similar products. In our experience, these arrangements are usually unsuitable for clubs. They are not low-risk investments and can expose the club to market volatility. They are also generally tax-inefficient for clubs, as reliefs available to individuals do not apply. In addition, such investments are sometimes made in the names of individual members or trustees, which can cause practical and legal difficulties on maturity or in the event of death or resignation. Clubs that invested in these products during periods of market downturn have, in some cases, suffered significant capital losses.
Cash held with banks and building societies is protected under the Financial Services Compensation Scheme (FSCS). From the 1st December 2025, deposits are protected up to £120,000 per authorised financial institution. Where surplus funds exceed this limit, they should be spread across different institutions to ensure maximum protection.
As a general rule, the promise of higher returns is accompanied by higher risk. Committees should be particularly cautious where investment opportunities are presented as “guaranteed”, where pressure is applied to act quickly, or where advice is given informally or by individuals with a personal interest in the outcome.
Where there is any uncertainty, professional advice should be sought before committing club funds. Clients of R H Jeffs & Rowe can contact us to review investment proposals and to ensure that decisions are consistent with the club’s rules, risk profile and long-term interests.