Power of attorney refund scheme
Power of Attorney - it’s never too early to prepare
In a recent post by the Financial Times Adviser, it appears that as many as 345,000 people in retirement do not have a lasting power of attorney.
In a study recently conducted by Zurich, more and more people are using income drawdown on their pensions to fund their retirement life. The recent study indicates that 79% of individuals in drawdown pensions do not have a lasting power of attorney in place, which, if the retiree loses mental capacity, could cause their drawdown pension to stop.
People associate lasting powers of attorney with later life and losing mental capacity. In actual fact, a lasting power of attorney needs to be set up earlier on in life so that the efficient management of an individual’s finances can still be managed should they lose mental capacity. As a result of the pensions freedom, more people are using pension drawdowns instead of annuities to fund their retirement, giving them responsibility to manage their retirement income.
According to Alzheimer’s UK, there are 850,000 people living with Dementia in the UK. This could increase 1,000,000 by the year 2025. The Zurich study found a small 21% of retirees do have a registered lasting power of attorney.
A lasting power of attorney should ideally be prepared earlier on in life, whilst the individual still has full mental capacity. The concept of a financial lasting power of attorney is that the individual prepares a lasting power of attorney appointing either family members, close friends or known professionals. All the while the individual retains mental capacity, they will continue to manage their finances. If they need assistance they can call upon their attorneys for help. If they start to lose mental capacity, their attorneys will then step in and assist.
An example of this in practice can be illustrated as follows: before retirement, an individual prepares a lasting power of attorney appointing family members, and the document is registered straightaway to activate it. The individual opts to choose a pension drawdown to fund his retirement, but a few years into retirement he loses mental capacity and cannot manage his finances; at this point, the attorneys are ready to step in and manage the individual’s retirement income on his behalf.
Lasting powers of attorney are vitally important in later life but it is important to prepare them earlier on in life. For advice on lasting powers of attorney, or what would happen if you did not prepare a lasting power of attorney, please do get in touch.
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