A recent report by Zurich warning of a ‘later-life financial crisis’ for retirees has caused quite a stir. According to the pension provider, four in five retirees – a huge 79% – using drawdown to fund their retirement haven’t set up a Lasting Power of Attorney (LPA).
1.7 million people are at risk of being caught out by this blind spot. LPAs are a legal way for someone to give a family member, friend or professional the authority to make decisions on their behalf. They can be used when the person who set up the LPA loses the capacity to make their own decisions, due to illness or injury.
If an LPA has not been set up, even next-of-kin could be stopped from stepping in. They would need to apply to the courts to help manage their loved one’s finances, when they can’t do so themselves. If your loved one has lost capacity, Severn Estate Planning can help you organise this Deputyship for them.
Drawdown pensions are becoming more popular. The FCA notes that twice as many people are choosing this option over annuities, which only a few years ago made up the vast majority of pensions. This is down to the government introducing pension freedoms in 2015, allowing people to choose between the two. Zurich’s study is based on a UK survey of almost 750 people who have moved into drawdown since the change.
Retirees with drawdown pensions have to take charge of their income in retirement, and make complex decisions about their finances. Many people have not thought about how this could be impacted by sudden bad health, which is more likely in old age.
One of the most distressing conditions to affect the elderly is dementia. Numbers of people affected by the illness are on the rise. According to the Alzheimer’s Society, by 2025 there could be over 1 million people living with the illness. Combined with the increase in drawdown pensions, it is not something to be ignored.
No one likes to think about losing their mental capacity. However, it is important to plan ahead rather than leave things to fate. Failure to do so can result in the loss of assets. This leaves vulnerable people with decisions they are unable to make.
LPAs can cover health and welfare issues, finances, or both. An LPA can only be registered while you are of sound mind. It is vital that you create one before it is needed. With a third of people in the study relying on drawdown as the main source of income in their retirement, Zurich’s report is a wake-up call for anyone yet to organise an LPA, whether they have a drawdown pension or not.
Want to know more? Find out about our Lasting Power of Attorney service here. If you need to set up your LPA, get in touch with Severn Estate Planning to find out how we can help. Call us today on 01743 387990. Or, email us at firstname.lastname@example.org for a chat with one of our friendly advisers.