Could your drawdown pension be at risk?
Posted on June 26th 2018
Your loved ones could be unable to manage your finances if you become too ill to do it yourself.
A report from Zurich has warned that 4 in 5 retirees (79%) using drawdown to manage their retirement savings face a potential ‘later-life financial crisis.’ This is because they have not created a Lasting Power of Attorney.
The government has scrapped rules requiring people to buy an annuity at retirement. Now, many people are choosing ‘drawdown.’ This gives them the responsibility of managing their own income when they retire, rather than automatically receiving a set amount per month.
Who would manage your finances if you become unable to?
The report says that more than 345,000 retirees currently using income drawdown, have not given anyone the legal authority to make decisions on their behalf if they become unable to. This is very worrying news.
Without a Lasting Power of Attorney even next of kin (for example, a husband or wife) could not take charge of your finances. This includes managing your pension, but also selling your property, allocating money for your care, or even accessing your individual bank account to pay bills. They would have to apply to the Court of Protection, which can take a long time, and is often an expensive process. This could create a very difficult financial situation for your loved ones.
By 2025, Zurich estimates that 1.7 million retirees could be at risk of this situation becoming a reality.
Why do retirees avoid making a Lasting Power of Attorney?
Stigma around creating a Lasting Power of Attorney is linked to a fear of losing mental capacity. Understandably, many people do not like to consider a future where they could become unable to make decisions.
Losing mental capacity is often associated with a serious degenerative disease such as Alzheimers, or a catastrophic head injury. Neither of these situations is something anyone wants to imagine themselves in.
Despite this, the Alzheimer’s Society estimates that by 2025 there could be more than a million people living with dementia. This number is only set to increase. Headway, the brain injury charity, report that someone is admitted to the hospital with a head injury every 90 seconds. Losing mental capacity does not discriminate – unfortunately, it could happen to anyone.
Ignore the stigma – protect your future:
By making a Lasting Power of Attorney you are protecting your loved ones if the worst happened. The best thing to do is always to plan for the future (whatever that may hold), before it’s too late.
It’s also important to remember that people make Lasting Powers of Attorney for a variety of reasons. Many people make them, not because they feel they are going to lose mental capacity through illness or injury, but because they would simply rather a loved one take care of their finances or medical decisions on their behalf when they are older.
How can we help?
We offer free initial advice, and home and hospital visits in the local area. Call us today on 01244 312306 or fill in our contact form to speak to one of our specialist solicitors.
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