Applications for Lasting Powers of Attorney are set to rise to over 330,000 during 2015 as retirement savers and their families wake up to the growing need for control over their finances especially in the light of the new pension freedoms and drawdown equity release, according to analysis from Key Retirement.
Figures from the firm indicate that applications are expected to grow by around 12% this year from 295,000, compared to just 80,000 a year when they were launched in 2007.
A Lasting Power of Attorney (LPA) is a legal document which gives the person or persons of choice the power to deal with an individual’s affairs. These trusted people will then become legally appointed attorneys and will be able to use these documents to act on the person’s behalf whenever necessary.
There are two types – the property and financial affairs LPA covering money and property matters, which can be used at any time and even made temporary use of, and the health and welfare LPA covering healthcare decisions which can only be used if people lose mental capacity.
However, Key Retirement is warning that the increased financial flexibility from pension freedoms and growing use of drawdown equity release plans makes it even more important retired savers have LPAs enabling relatives or friends to deal with an individual’s affairs.
Government figures show an average of 14,250 applications a year have been made to the Court of Protection over the past three years to appoint deputies to make financial or health decisions for incapacitated people who did not have LPAs.
The launch of Dementia Awareness Week highlights that there are around 800,000 people with the condition in the UK, and the disease costs the economy £23 billion a year. By 2040, the number of people affected is expected to double – and the costs are likely to treble.
Key advises customers taking out drawdown equity release to have LPAs in place so trusted people can make decisions on their behalf, and it believes that will become more important following the introduction of pension freedom.
Dean Mirfin, technical director at Key Retirement, said: “Sales of LPAs are growing and it is reassuring to see the strong demand as people focus on their potential needs in later life.
“However there is still a huge need for more people to be made aware of the importance of having an LPA in place, particularly now that financial flexibility is open to all and more of us will be managing our finances into later life.
“Numbers affected by dementia are set to double over the next 25 years and it’s essential that families avoid a costly and time consuming court process. LPAs should be regarded just the same as Wills and be part of all people’s financial planning for later life and the risks of incapacity that unfortunately brings. With 65% of the equity release market in drawdown people need to be made aware of the risks of not having an LPA.
“Anyone who is exercising the pension freedoms or has a drawdown equity release scheme is totally exposed to having their money trapped or frozen if they do not have LPAs until the Court of Protection appoints attorneys. For equity release this means that access to any drawdown facility will be suspended whilst waiting on the court.”
