Nearly four out of five retirees on income drawdown could face hardship in later life because they haven’t set up a Lasting Power of Attorney (LPA), new research has revealed.
Insurance provider Zurich has found that 79% of retirees who are using income drawdown to fund their retirement have not set up an LPA. This equates to more than 345,000 retirees using income drawdown without making plans for their future financial well-being.
An LPA gives a relative or friend the legal authority to make decisions on your behalf if, for example, you fall ill or develop dementia.
Without an LPA in place, even next of kin need to apply to the courts to be responsible for their relative’s finances.
According to the Alzheimer’s Society, there are currently 850,000 people in the UK living with dementia. This could increase to more than one million by 2025. However, Zurich found just one in five (21%) of the 742 retirees polled have registered an LPA.
The study also found that while two thirds (66%) of people who had sought advice from a financial adviser were likely to have an LPA, only 17% who had not had advice had one.
Alistair Wilson, a savings expert at Zurich, says: “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.”
Harriet Hill, programme partnerships officer at Alzheimer’s Society, adds “We need to get to the stage where a LPA is taken out as a standard practice, with financial services advising people to do this as early as possible.
“In cases where LPAs are not in place, assets and equity may be lost, or those in a vulnerable position may be forced to make decisions they are no longer able to make”.
For more details on setting up an LPA, visit Lastingpowerofattorney.service.gov.uk/home.