Pension Freedoms and the importance of a Lasting Power of Attorney
Do you have a drawdown pension? Or are you a financial adviser for clients with pensions? Four out of five retirees (79%) using pension freedoms to manage their retirement savings face a potential ‘later-life financial crisis’ as they have not yet set up Lasting Power of Attorney (LPA), Zurich has warned.
Savings expert Alistair Wilson at Zurich has said that since the pension freedoms, preparing and registering a Lasting Power of Attorney has become even more important than ever. “With more and more people moving into drawdown, this is creating a ticking time bomb that could leave thousands of people facing a potential later-life financial crisis”.
New pension freedoms require ongoing advice
Previously, a pension annuity was set up at the start of retirement and it would then happily continue making payments without any intervention, until death. The new pension freedoms requires ongoing advice and management of investments throughout retirement. This also requires the client to have good mental capacity and ability to do this.
Don’t be forced to apply to the courts
More than 345,000 retirees using income drawdown to fund their retirement have not yet given a trusted family member or friend the legal authority to make decisions on their behalf if they no longer can by making a Lasting Power of Attorney. Many assume this would happen anyway, but without a LPA in place, even next-of-kin would be forced to apply to the courts to take charge of a spouse or relative’s finances.
This not only causes problems, cost and distress for the pension holder and their family who may be relying on the pension payments to fund their lifestyle, and it also causes serious problems for a financial adviser who is unable to manage the drawdown pension on behalf of their client, without the ability to give authorisation and ongoing instructions.
You’ll hopefully never need it, but…
You can think of a LPA very much like an insurance policy, where it needs to be set up before it’s needed, otherwise it’s too late. Usually, once you make one, you never have to think about it again, and in some cases it will never actually be needed. However, you know that if the worst does happen, matters will be dealt with by those you trust.
Call me for advice and help to prepare appropriate Lasting Powers of Attorney documents which will protect you, your pension or investments and your family for as long as it’s needed.