£21.6 billion has been accessed since pension freedom were introduced,in 2018 730,000 individual withdrew £6 billion from their pension holdings.Most of the withdrawals represent small amounts circa £8,000 per individual. However there are clients who have accessed much larger pots by way of Defined Benefit transfers and moving into drawdown to access the flexibility that the rules allow.
I tend to get a puzzled look when i ask the question -have you a Power of Attorney in place, typically the answer is -why would i need that at my age (56) ? It is a crucial part of the planning process 80pc of people have not considered it at all, slightly less at around 65pc have no valid will in place or nothing at all. Loosing capacity is not only a very emotional process for all involved but that raised the question, how can i or my loved ones manage my pension fund or investment portfolio and other assets. I highlight a few points on why a few hundred pounds invested can keep your life goals on track in the way you planned for in your retirement.
Planning for the unexpected
A Power of Attorney is a legal document that allows you to give someone else the legal authority to act on your behalf. There are several different types of Power of Attorney. A Lasting Power of Attorney (LPA) – previously called an ‘Enduring Power of Attorney’ – allows your attorneys to make decisions for you when you no longer wish to, or when you lack the mental capacity to do so.
When making an LPA, you are permitting someone to act on your behalf when you are no longer mentally capable of making decisions on your behalf.
Different types of LPA
Health and welfare – this covers health and care decisions and can only be used once you have lost mental capacity.
A LPA can generally make decisions about things such as:
- Where you should live
- Your medical care
- What you should eat
- Who you should have contact with
- What kind of social activities you should take part in
You can also give special permission for your attorney to make decisions about life-saving treatment.
Property and financial affairs – an LPA for financial decisions can be used while you still have mental capacity, or you can state that you only want it to come into force if you lose capacity.
An LPA for financial decisions can cover things such as:
- Buying and selling property
- Paying the mortgage
- Investing money
- Paying bills
- Arranging repairs to property
You can restrict the types of decisions your attorney can make, or you can let them make all decisions on your behalf.
If you’re setting up an LPA for financial decisions, your attorney must keep accounts and make sure their money is kept separate from yours. You can ask for regular details of how much is spent and how much money you have. This offers you an extra layer of protection. These details can be sent to your solicitor or a family member if you lose capacity.
A property and financial affairs LPA allows your attorneys to make decisions regarding your finances. This could include decisions about paying bills, operating your bank accounts or even selling your home.
A health and welfare LPA allows your attorneys to make decisions for things such as medical treatment, accepting or refusing types of health care, and whether or not you continue to live in your own home. You can also give your attorneys the power to make decisions about life-sustaining treatment for you. Your attorneys can be the same as those appointed under the property and financial affairs LPA.
If you decide not to make an LPA and subsequently lack the mental capacity to understand the nature and effect of the document, you may no longer be able to create an LPA. In those circumstances, if you are no longer mentally capable of dealing with your financial affairs, someone will have to make an application to the Court of Protection to be appointed as what is called your ‘deputy’. This process applies even if the person incapacitated is your spouse or registered civil partner.
To avoid the court making decisions on your behalf, it is therefore beneficial to create an LPA because it allows you to decide in advance:
- The decisions you want to be made on your behalf if you lose the capacity to make them yourself
- The people you want to make these decisions
- How you want the people to make these decisions
Who will have the authority?
If you’re married or in a registered civil partnership, you may have assumed that your spouse would automatically be able to deal with your bank account and pensions and make decisions about your healthcare if you lose the ability to do so. This is not the case. Without an LPA, they won’t have the authority.
Enduring Power of Attorney
Enduring Powers of Attorney (EPA) were replaced by LPAs in October 2007. However, if you made and signed an EPA before 1 October 2007, it should still be valid.
You might already be using an EPA without having registered it so that someone can act on your behalf. This is fine until you become unable to make your own decisions relating to financial and property matters. Once this happens, your attorney must register your EPA before they can take any further action on your behalf.
An EPA only covers decisions about your property and financial affairs; an attorney doesn’t have power under an EPA to make decisions about your health and care. You might want to consider setting up an LPA for health and care decisions to work alongside the existing EPA.