September 07, 2015
All drawdown clients should have a lasting ‘power of attorney’ in place when they retire, according to a firm of solicitors, unless clients have explicitly indicated that they do not want one.
Moore Blatch has warned advisers this recommendation should be raised specifically with reference to the fact that drawdown requires ongoing management.
It explained that drawdown, unlike an annuity, requires the person to be able to manage their financial affairs throughout retirement, until their death.
However, most clients will be unable to manage some, or all, of their financial affairs at some point during the retirement, due to physical ill-health or a lack of mental capacity.
LPAs allow a person to appoint a third party (attorney) to make decisions about their health, welfare, finance and property, if they no longer have the capacity to do so themselves.
The firm added that in the context of drawdown, this could include anything from managing their investments to income being redirected in order to fund care needs.
Fiona Heald, head of the court of protection team at Moore Blatch solicitors, pointed out that without an LPA, a third party would not legally be allowed to instruct an adviser on any changes to a drawdown arrangement.
The firm also mentioned that take up of LPAs is still “woefully low”, with current data showing that just under one million LPAs have been taken out in England and Wales since 2012, compared with around 1.5m people aged over 85 and around 5 million aged over 75.
It put this down to a general lack of awareness or willingness to accept they might need one, along with the perceived and actual complexity of putting one in place; adding that these reasons should not apply to drawdown clients who must have received professional advice.
Mike Morrison, head of platform technical at AJ Bell, told FTAdviser that it would be overkill to force everyone into an LPA, but it is still important for advisers to make customers aware and preferably involved their family in such decisions.
“There’s a danger that these things could come back and hit advisers, in terms of consent for investments made, you can imagine how the ombudsman would view something like this.”
David Trenner, technical director at Intelligent Pensions, said that they require all clients over 75 to have a power of attorney, or to confirm in writing that they will not do so.
“There is a huge risk to an IFA who does not get clients to complete [power of attorney].
“We can all say that someone in a care home who has been diagnosed with dementia cannot make their own financial decisions, but this is not something which happens overnight,” he commented, adding that if a client makes a poor financial decision in their 70s it could result in a claim when they are in their 80s and cannot explain to anyone that they understood the advice.
For advice in making your power of attorney I'll be happy to offer a free consultation no obligation if you live in Bexhill, Hastings, Battle, Rye, Hailsham, Eastbourne or anywhere in East Sussex and Kent.
(Published in www.ftadviser.com by By Peter Walker, Aug 13, 2015)
