Over recent years, the popularity of equity release and drawdown plans among retirees has exploded like never before. A variety of studies and surveys have brought to light conclusive evidence that recentreforms have had a marked impact on both attitudes toward and the way retirees choose to access their savings.
In particular, the Equity Release Council published the results of a survey which found that an enormous 65% of those who opted for an equity release program also selected a drawdown plan. The appeal of being able to access lump sums of cash when and where required is both enormous and growing in popularity to say the least – the idea of having maximum control of all the savings being one of the obvious advantages in the eyes of most.
However, this kind of freedom to access savings into retirement also comes with something of an attached risk. In the instance that the health or wellbeing of any given retiree was to suddenly take a turn for the worse, it could lead to a situation where a rather extensive sums of money sit idly behind the scenes and cannot be tapped into.
When access to funds becomes difficult or impossible, the impact on the individual’s life can be devastating to say the least.
Despite the fact that this is not only something of a long-standing risk but also the kind of eventuality that affects thousands every year, recent estimates suggest that no more than 1% of the population of United Kingdom has actively established lasting power of attorney (LPA). LPA essentially involves the appointment of another individual or individuals, usually friends or family, who will become legally entitled to take control of an individual’s finances if and when they themselves become unable or unwilling to do so.
Of course the immediate question is why – as in why are so few UK adults actively looking into lasting power of attorney, when the evidence clearly points to something of enormous importance? Is it a case of a generally widespread lack of awareness? Or is it simply that so many independent financial advisers are simply not giving the necessary advice?
Research suggests that one of the problems is the way in which so many adults up and down the country really only factor the prospect of death into the equation when serious and debilitating physical and mental health conditions can in fact be even more difficult to handle without LPA in place. Without the establishment of LPA, all available funds which could be quite extraordinarily important for a variety of reasons simply remain in limbo prior to the Court of Protection then granting power of attorney, which in most cases takes a minimum of several months though can often drag on for years.
Understandably, the complexities of LPA and the eventualities for why it exists can be somewhat disconcerting and difficult for some to get to grips with. Nevertheless, obtaining and heeding the appropriate independent financial advice at the right time can help ensure that regardless of what the future brings, entirely avoidable financial roadblocks and complications can be avoided altogether.