The Office for National Statistics recently released data showing a combination of net migration and longer life expectancy means the UK population is expected to rise to almost 75 million by 2039, with more than one in 12 people aged over 80.
The ageing society has been a concern for policymakers for some time but conscientious clients will also be thinking about building a plan fit to stand the test of time.
The ONS’ “how long will my pension need to last?” calculator shows a 55-year-old male today can expect to live for another 31 years on average. They have a 10 per cent chance of reaching 100 years of age. Meanwhile, a woman age 55 today can expect to get close to her 90th birthday and has a 10 per cent chance of reaching age 103.
Alongside a sustainable retirement income strategy and generational wealth planning, clients faced with these statistics may also want to prepare for the possibility they could become less able to make important choices about their finances and personal welfare as they grow older.
If this is a discussion you are having with clients, it is useful to be aware of the ins and outs of lasting power of attorney legislation, which allows individuals to manage their approach to handing control to friends, family or a professional attorney.
Lasting power of attorney was introduced in England and Wales in October 2007, building upon and replacing the previous Enduring Power of Attorney Act 1985.
The legal document allows an individual to appoint an attorney to make certain decisions on their behalf in specific circumstances and gives them the option to specify when they wish to grant that control.
There are two different types of LPA: property and affairs, and personal welfare.
Property and affairs
The property and affairs LPA allows an individual to elect someone to take over decisions about personal spending as well as how property and financial affairs are managed. This type of power of attorney can apply while the client is still mentally capable, unless the power is restricted in some way.
For example, in some cases, clients may still be able to make decisions themselves but find it easier to delegate certain powers. Perhaps they are considering spending long periods of time out of the country and prefer not to discuss financial matters over the phone or via email. The main difference between this type of LPA and a general power is the fact it remains valid even if the individual becomes mentally incapable.
Alternatively, if the client chooses, it can be stipulated the LPA will not come into effect until they lack mental capacity. The document must be drafted to specify this.
A personal welfare LPA, meanwhile, allows the attorney to make decisions about an individual’s healthcare and welfare. These decisions include refusing or consenting to medical treatment on the individual’s behalf and deciding where they live. These decisions can only be taken when the individual lacks capacity to make them themselves.
It is possible under each LPA to appoint different people to make those decisions. Some clients may prefer to have a professional fiduciary to make financial arrangements but leave responsibility for their personal welfare to someone else.
In order for each type of LPA to be valid, it must be registered with the Office of Public Guardian and there are certain formalities to follow. Applying for an LPA after someone becomes mentally incapacitated can be time-consuming and stressful.Planning ahead can help avoid distress and give peace of mind.
In summary, the steps involve ensuring that before execution of the document the individual has not been placed under undue influence and they understand the powers they are giving to their attorney. The second stage is registration of the LPA, which will not be valid until this step has been completed. The current charge for registration is £110 per LPA and they take between eight and 10 weeks to register. This includes a four-week waiting period required by law to enable those involved to raise any concerns.
According to the Department of Health, the number of people living with dementia in the UK is expected to reach 1.6 million by 2040. Helping clients to plan ahead can mean both they and their family avoid unnecessary stress, expense and delay, and gives reassurance they have granted decision-making powers to those they trust.
Rachael Griffin is financial planning expert at Old Mutual Wealth