Retirement savers concerned about the risk of not being able to control their finances because of the onset of dementia are failing to act, new research shows.
According to Key Retirement, 43% of over-55s are extremely concerned about the financial impact of suffering dementia in later life rising to nearly half (47%) who worry about their partner being unable to access their money.
The study of more than 1,000 over-55s shows just one in eight (12%) have acted by setting up Lasting Power of Attorneys (LPAs) to ensure important decisions can still be taken on their behalf. Another 39% say they are considering setting up LPAs but have yet to do so.
The risks of not having LPAs in place are potentially huge – families will need to apply to the Court of Protection for a Deputyship Order which can typically take many months during which finances can be frozen, or other important decisions may be delayed.
The process can also be expensive starting from £400 for an application plus a further £850 plus VAT for the work done up to and including the Deputyship Order, and a further £100 for an assessment of the deputy. If no deputy can be found a professional deputy will be appointed and for this the charge will be £1,500 plus VAT for the first year, and £1,185 plus VAT for each year thereafter.
Key’s study shows more than half (54%) of over-55s would trust their partner or spouse to look after their finances if they were mentally incapacitated while just 28% would trust their son or daughter.
But the study found widespread confusion about what access people have to their spouses’ or partners’ financial or legal affairs without an LPA as the table below shows, headed by 36% thinking that without an LPA they can decide on their healthcare.
Dean Mirfin, chief product officer at Key Retirement, said it was essential that families take out an LPA to avoid a costly and time consuming court process.
“Anyone who is taking advantage of pension freedoms or has a drawdown equity release scheme risks having their money 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. LPAs are not just about money, they are also about being able to make those important decisions about someone’s healthcare should the need arise.
“Not only is it more cost effective in the long term to do so, you are also ensuring that those who you trust the most are certain to be the ones making important decisions about your finances and your health and welfare when you need them most.”
Data shows around 650,000 applications for LPAs were made last year and around 2.5 million are currently in place. However around 14,500 applications are made each year to the Court of Protection.
A Lasting Power of Attorney 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.
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