More than two out of five over-55s are confused about the different choices of lasting power of attorney, research has revealed.
According to a survey from Key Retirement, which polled 1,091 adults aged 55-plus, 40 per cent of respondents are unsure about the differences between a property and financial affairs lasting power of attorney, and a health and welfare one.
The former enables trusted representatives to look after matters such as paying bills, investing money and selling property, while the latter covers all health and care decisions.
According to Key Retirement, the research results highlight “the growing need for help and advice, as millions of retirement savers and equity release customers face managing their finances later into life”.
For Dean Mirfin, chief product officer at Key Retirement, “the financial flexibility that equity release and pension freedoms offer give people more control over their money, which is very welcome, but that can mean more risk when physical and mental health suffers”.
He said: “Lasting powers of attorney provide vital support and enable those we trust to make decisions and are relatively straightforward to set up while ensuring customers can still control their money.”
With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of defined benefit (DB) schemes and to move their nest eggs into defined contribution plans.
Figures published by Mercer in April showed that as much as £50bn has been pulled from final salary pension schemes in the last two years.
The survey showed that many individuals will take out both types of lasting power of attorney, with the financial version being slightly more popular – around 56 per cent of respondents said they would choose this one, when compared with 48 per cent who would choose the health lasting power of attorney.
There are 2.5 million power of attorney agreements currently registered in England and Wales.
A retired senior judge, Denzil Lush, warned recently that the power of attorney system in England and Wales lacks adequate safeguards to protect people and their assets.
The study also showed that part of the reason for growing interest in lasting power of attorney is that many over-55s have first-hand experience of relatives being unable to look after their finances or health in later life – around 38 per cent said they were considering this agreement after seeing loved ones suffer.
Mr Mirfin said the risks of not having a lasting power of attorney in place are considerable.
He said: “Families will need to apply to the Court of Protection for a Deputyship Order, which can typically take many months, during which finances are frozen and other important decisions may be delayed.”
Currently around 14,500 applications are made each year to the Court of Protection.
Mr Mirfin said: “Thousands of over-55s have already seen relatives suffer, which give them motivation to ensure the same does not happen to them.
“But, as our research reveals, there is a real lack of knowledge and the need for help and support in making sure that people are well protected not just for money matters but also for their healthcare and wellbeing.”
Around six out of 10 of the respondents said they would trust their spouse or partner to be the person making decisions on their behalf, while 31 per cent would choose sons or daughters.
Only 2 per cent said they would prefer a lawyer to be their lasting power of attorney representative.
The research also showed that around 13 per cent of over-55s have an agreement in place, while another 39 per cent have considered setting up a lasting power of attorney, but have not got round to it yet.
According to Paul Gibson, managing director of Granite Financial Planning, an increasing number of his clients – most of them aged 50 plus with wills in place – now also have power of attorney agreements in place.
He said: “I sense that people in this camp are becoming more aware of the necessity for this because of ageing relatives they may have to look after.”
“There is sometimes confusion over the process, and we generally suggest they see a lawyer who specialises in this area to ensure they put the right power of attorney in place and importantly appoint the right person.”