We have previously written an article on Powers of Attorney and the importance of these in later life financial planning. In this piece we address here specifically the issues that may apply to pensions.
There are currently 850,000 people in the UK suffering from dementia and this is expected to increase to 1m by 2025 and a staggering 2m by 2051 (source: Alzheimer’s Society). So there will be a significant growing number of people that will be living longer but suffering from mental incapacity.
The following are situations with pensions which may become difficult to address without a Power of Attorney in place:-
- inability to switch between funds. This may be important, for example, to protect gains by transferring into lower risk rated funds such as cash and avoiding future stockmarket volatility;
- inability to reduce, increase or stop the level of income being drawn. For example, a reduction in income may be required because this was not being spent or was pushing the client into the higher rate tax band. An increase in income may be needed to help pay for healthcare;
- inability to nominate or revise existing beneficiaries to receive death benefits;
- inability to switch between pension providers to access, for instance, a plan which will offer flexible retirement options.
Pensions are generally a major asset for clients along with property as they enter their retirement years. If mental capacity was lost it could cause problems for the nearest and dearest without a Power of Attorney in place or, in absence of one, recourse to the Court of Protection.