Providing legal services to the people and businesses of Brentwood since 1850

Do drawdown clients need a Lasting Power of Attorney?


24th September 2020 | Alisha Francis

With control comes responsibility, but for those who lose their mental capacity, investment decisions still need to be made on their behalf

The control that pension freedoms have given people over their finances at retirement also means individuals are taking on more responsibility for their funds. People now have to make active financial decisions about their pension pots, and if they opt to go into drawdown, as many more people are doing, instead of buying an annuity, the need to make decisions continues throughout retirement.

From a financial perspective, if someone taking drawdown receives benefits, it is complex and requires ongoing decision-making. It’s not just about appointing someone you trust; it’s thinking about what you are expecting them to do. What if you are handing them a box of drawdown assets that require ongoing attention?

People are living longer and as well as physical conditions becoming more prevalent, conditions that impair mental capacity are also a possibility with advancing age. For those who lose mental capacity through dementia and other reasons, making investment decisions, and choosing how much income to take, will need to be offloaded to someone acting on their behalf.

A Lasting Power of Attorney (LPA) is a legal document that enables people to appoint someone they trust to make decisions and manage their affairs on their behalf. The appointment needs to be made when people are of sound mind and can also be made to cover temporary situations – if they are in hospital, for example.

Financial commentators say everyone, not only drawdown clients, would benefit from having an LPA in place. There are two types: one to cover decisions about wealth and property, and another to cover health decisions.

However, unless clients have had personal experience of an LPA for an elderly relative, it is something they tend to ignore because they think they will not need it. Sharing personal experiences is one of the ways the financial and legal services industry can encourage more people to appoint attorneys.

Even those who know what LPAs are may not understand the consequences of not having one which is applying to the Court of Protection to appoint a deputy, which can be costly and as time-consuming as applying for probate upon death. Without an LPA, an application must be made to the Court of Protection to appoint a deputy. While the costs of setting up and registering an LPA can be a few hundred pounds, the costs of applying to the Court of Protection and ongoing costs of a deputy can be significantly more.

People often wrongly assume their spouse or partner will be able to make financial decisions on their behalf if they become incapable, but this is not the case

If someone is 65, they may not be the prime age for dementia but they could be incapacitated by illness such as a stroke.

Of course, it is natural that people may be concerned at the idea of handing control of their affairs to another person – but the more information that is available and the more we can normalise the idea of having these conversations and putting LPAs in place, the easier it will be.

Here at Landons we believe that everyone should have an LPA, even younger clients however we are conscious of the fact that we need to strike a balance between not scaring clients but posing the importance and the consequences of not having it in place. Speak to one of our experienced and personable Solicitors today who would be very happy to answer any questions you may have.