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A recent report by Zurich has revealed that an alarming number of retirees are at risk of later life ‘financial crisis’ as they have not put a lasting power of attorney in place.
A lasting power of attorney (LPA) is a legal document that gives a trusted friend, relative or professional the ability to manage your finances when you are no longer capable of doing so. Without having one in place means even next-of-kin would be forced to apply to the courts to take charge of a relative’s finances should they fall ill.
Zurich has said that the problem has arisen from new pension freedoms where people now have more of a responsibility over managing their income in retirement with the ability to choose between annuities and drawdown options. Zurich interviewed 742 people who have moved into drawdown since the pension freedoms, between December 2017 and January 2018. The report states that four in five retirees using these new pension freedoms do not have an LPA in place.
Alistair Wilson, a savings expert at Zurich, said: “Thousands of people are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases.
“Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up an LPA is well before you need it, and pension providers should be highlighting this to their customers.”
“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. It is vital that people plan for a time when managing their pension might become hard, or even impossible, and speaking to a financial adviser is one of the best ways to do this.”
Zurich’s findings have highlighted a “financial planning blind spot” that could prevent an individual trusted by the retiree from immediately stepping in to help them manage their affairs should they suddenly fall ill or lose mental capacity. Having an LPA in place would help ensure that financial difficulties and stress could be avoided.
If you have any queries about putting an LPA in place, please feel free to get in touch with us.