Updated DfE Guidance on Trust Reserves

Issued on the 2nd June 2025, the most recent Managing Academy Trust Reserves guidance from the Department for Education (DfE) advises Trusts regarding the management of free reserves. 

Estimating that across the sector, “around 80% of Trusts hold reserves of at least 5% of total income,” the guidance reinforces the importance of transparency, planning and strategic decision-making.  

Trusts are reminded that holding reserves is both a responsible and necessary part of effective financial management. However, reserves should be underpinned by a clear policy, regularly reviewed by trustees, and aligned with the Trust’s educational objectives and long-term sustainability.  

The guidance urges Trusts to clearly explain their approach to reserves in their annual reports, including how and why reserves are held, any designated funds, and how they support the Trust’s priorities. 

With increased scrutiny and a growing emphasis on value for money, the guidance provides examples of acceptable reasons for holding reserves, including: 

Importantly, where reserves exceed immediate operational needs, the DfE confirms that Trusts may invest surplus funds, provided this is done in accordance with the Trust’s Articles of Association, investment policy, and with due regard to the requirements of the Academy Trust Handbook alongside the Charity Commission’s guidance. 

Investment decisions must be risk-assessed, ethical, and prioritise the security of the funds. Any returns generated should directly support the Trust’s charitable objectives. Trustees must ensure they have proper oversight of investment strategies and should review performance and risk regularly.   

As you prepare for year-end reporting and future financial planning, now is an ideal time to assess your reserves and investment strategy, ensuring both are aligned, evidence-based and clearly explained in your Trust’s annual report. 

Transparency and intention are key – reserves are not just about safeguarding the present, but enabling sustainable, impactful growth for the future.