Four in five retirees at risk by not naming power of attorney

Almost four in five (79 per cent) retirees who are already drawing from their pension pot have not set up a Lasting Power of Attorney (LPA).

In a new report, Zurich warned that retirees are facing a potential “later-life financial crisis” by ignoring the legal document, which gives a named family or friend the authority to make decisions on their behalf if they are no longer able to. In the absence of an LPA, families could be locked out of their loved one’s finances and may face a long and costly court battle before they can step in.

“Registering an LPA has become even more important since the pension reforms”, said Alistair Wilson, a savings expert at Zurich. “Thousands of people are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases. Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up an LPA is well before you need it, and pension providers should be highlighting this to their customers.

“With more and more people moving into drawdown, this is creating a ticking time bomb that could leave thousands of people facing a potential later-life financial crisis. It is vital that people plan for a time when managing their pension might become hard, or even impossible, and speaking to a financial adviser is one of the best ways to do this.”

According to the latest figures from the Alzheimer’s Society, 850,000 Britons are living with dementia. Zurich has estimated that more than one million people could be affected by dementia by 2025.

Yet despite this risk, just 21 per cent of people who have moved into drawdown since the pension reforms have registered an LPA. People who work with a financial adviser were almost four times more likely to have an LPA than those who had not sought advice.

“An LPA can be a very important part of advance planning for a time when a person will not be able to make certain decisions for themselves,” said Harriet Hill, programme partnerships officer at the Alzheimer’s Society. “It allows the person to choose someone they trust to make those decisions in their best interests. This can be re-assuring and making an LPA can start discussions with family or others about what the person wants to happen in the future. We need to get to the stage where an LPA is taken out as a standard practice, with financial services advising people to do this as early as possible.

“The stigma around the LPA, as with dementia, is compounded by its links to mental capacity. People are reluctant to consider a future where they may not be able to make their own decisions due to the connotations they associate with this. In cases where LPAs are not in place, assets and equity may be lost, or those in a vulnerable position may be forced to make decisions they are no longer able to make.”

There are two different types of LPA – health and welfare and property and financial affairs – an each requires a separate form. These forms can be requested through a financial advisor, or via The forms can be changed or cancelled at any time, as long as you are deemed able to make major decisions.

Kathryn Gaw

Kathryn Gaw is a financial journalist based in Belfast, Northern Ireland. She has been writing about personal finance and investment trends for more than a decade, and her work has been featured in the Financial Times, City A.M., the Press Association, and The Irish Independent, among many other publications.