More than 345,000 retires using income drawdown to fund their retirement have failed to give a family member or friend legal authority to look after their affairs if they no longer have the capacity.
Just one in five people who have moved into drawdown since the pension reforms have registered an LPA, but the research by Zurich found that people with a financial adviser were almost four times more likely to have an LPA than those who hadn’t received advice (66% vs 17%).
This ‘financial planning blind spot’, could prevent a trusted person from immediately stepping in to manage the person’s affairs should they suddenly fall ill or lose mental capacity.
Without an LPA, even next of kin would need to apply through the courts to get access and control of a relative’s finances.
Zurich said the issue has developed since the dawn of pension freedoms in 2015 which mean people no longer need to buy an annuity at retirement. Instead, twice as many people are choosing drawdown over annuities, so the responsibility of managing income in retirement rests with them.
The insurer estimated that if the LPA gap continues to grow at the current pace, it could leave 1.7 million retirees at risk by 2025.