The Importance of Joined Up Thinking

Published on: May 29, 2018

New pension freedoms have made it even more essential for a Lasting Power of Attorney to be in place.

Very often the side issues arising from major legislative changes take time to become apparent. Sometimes these are minor issues whilst with others the need for secondary action becomes desirable if not essential.

In 2014, Chancellor of the Exchequer, George Osbourne, announced legislation that would pave the way for greater pension flexibility. The retirement planning world has changed dramatically.

Out went the enforced purchase of an annuity and in came the opportunity for individuals to manage their retirement pot in line with their own personal needs and objectives throughout their lives.  This route is commonly referred to an income drawdown.

The 2014 legislation removed the previous limitations on how much could be withdrawn thus allowing the individual to make a personal decision as to how much to take each year and even to forego any drawdown if the income was not required.

A real game changer.  Retirees have more options available to them than ever before, although as in many aspects of financial planning, certain issues are becoming more and more apparent. Of greatest importance are:-

Risk based investment management

As individuals are living longer, more importance is being placed upon the sustainability of the pension pot; income requirements and planned expenditure must be carefully measured against the level of market risk and volatility associated with the underlying investment strategy to deliver the returns required.

Lasting Power of Attorney

However, a potentially more significant problem is one which many financial advisers are either unable to assist their clients directly with or are simply unaware.

Zurich, the global insurer, has published a report which highlights that 4 in 5 retirees using the recent pension freedoms to manage their retirement savings face a potential ‘later-life financial crisis’ as they have not yet set up a lasting power of attorney (LPA) which appoints their nominated family member, friend or professional adviser to manage their financial affairs in the event of them losing mental capacity.  Zurich estimates that this could leave 1.7 million retirees at risk by 2025.

Without an LPA in place, next of kin would be forced to apply to the Court of Protection to take charge of a relative’s finances.  Not only would this be a costly exercise, the timescales to receive authority could take months, all this against the backdrop of seeing the potential suffering of a loved one.  The financial effects could be disastrous; the emotional effects likewise.

Planning your financial and legal arrangements are vital and should increase the chances of you enjoying a less stressful retirement.  One such document, a Lasting Power of Attorney, can be arranged and would not be put into effect until required, but that peace of mind that it is in place may just turn out to be invaluable.

Good estate planning is a fundamental component of creating and managing your Personal Financial Plan (PFP).  At Three Counties, our financial planners understand the importance of the benefits which can accrue simply by having up to date wills and LPAs.  But the drafting of the relevant documentation requires a specialist role that requires legal expertise that we simply do not aspire to hold.  Our preference is to work closely with one of the well-developed relationships we have with some of the highest quality Private Client solicitors in the region.

We believe this is the way to make sure that our clients’ overall plans are as close to watertight as possible.  All we ask is that you consider your own circumstances.  Please do not hesitate to get in touch if you require any assistance.

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