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Retirement savings leap

Retirement savings leap

But one in five young people still saving nothing

The number of under-30s saving enough for retirement has risen sharply by 9%[1]. As the success of auto enrolment continues, two in five UK workers (39%) aged 22–29 years old are now saving adequately for retirement, up from 30% last year. Despite this, more than one in five young people (21%) are still saving nothing for later life, with a further 20% saving seriously less than 12% of their income.

The research also shows that nearly two million ‘multi-jobbers’ – people with more than one job – are missing out on over £90 million a year in employer contributions because of the policy on auto enrolment thresholds. Multi-jobbers, who are often working full-time hours, are unfairly missing out on pension contributions for their overall earnings due to their income being split across different employers, thus falling foul of minimum earnings threshold for enrolment.

Auto enrolment playing a really important part
Projections using the latest ONS figures show that 1,831,127 multi-jobbers have at least one job that earns under £10,000 and is not enrolled in the company’s pension scheme. Based on the average salary from these jobs, collectively over £90 million of employer contributions a year could be claimed if the auto enrolment threshold was scrapped.

It’s encouraging that more young people are saving enough for a decent retirement, and auto enrolment has played a really important part. However, auto enrolment was designed as a safety net for a country facing a pensions crisis. This year’s study shows some of the hardest working and most financially vulnerable members of society are slipping through the auto enrolment net because of minimum earnings thresholds. This unfairly impacts multi-jobbers, who could be working the equivalent of full-time hours, yet without the financial benefit of having a single employer.

Renewed effort to improve the readiness for retirement
Meanwhile, savings levels have stagnated across the rest of the working population. At 55%, the proportion of UK workers saving adequately for retirement has dropped slightly for the first time since 2013, falling from 56%, the prevailing rate for the last few years.

Despite adequate savings rates having risen by 10% since auto enrolment was introduced in 2012, the stall in recent years demonstrates that a renewed effort is needed to improve the nation’s readiness for retirement.

Source data:
[1] 14th annual Scottish Widows Retirement Report – research looked at this age range because 22 is the age at which workers become auto-enrolled – Scottish Widows deems adequate retirement savings as a minimum of 12% of an individual’s income. ‘Seriously under-saving’ refers to saving 0–6% of income.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED, AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

Taking early retirement

Making the most of the next chapter in life

With increasing numbers now working past traditional retirement ages[1], stopping work can seem a long way off, especially for younger people. However, new research[2] reveals that the early retirement dream lives on. Nearly two thirds (60%) of those stopping work this year are doing so before their expected State Pension age or company pension retirement date.

The study which tracked the finances and aspirations of those planning to retire during the year ahead also found that those planning on retiring early could be facing a considerable reduction on their annual retirement income to the value of £3,394. The average expected retirement income, inclusive of savings and State Pension, for those retiring early is £18,567, compared to £21,961 for those not retiring early.

Planning to escape the daily grind
It appears that those planning to escape the daily grind early feel the most comfortable when it comes to their financial situation in retirement – with over half (56%) saying they feel financially well prepared compared with 49% of those working towards their expected retirement date. That’s reflected in the numbers taking professional financial advice – 68% of early retirees are seeking advice compared with 60% of those working until their projected retirement age.

The average age of those retiring early is 57, and early retirees will be making the most of their free time – over a third (37%) plan to take up a new hobby or sport, 27% will start voluntary or charity work and nearly a fifth (17%) are planning a long-term holiday or gap year.

Vital for funding our whole retirement
For many people stopping work early, it is not about planning to put their feet up. They want to keep busy and active by taking up hobbies, sports and charity work, and some are even planning a post-work gap year. With many of us set to live longer than ever before, it is vital to ensure we can fund our whole retirement.
The East Midlands is the early retirement capital of the UK with 72% of its retirees retiring early, closely followed by Wales (69%) and Yorkshire and the Humber (67%). τ

Source data:
[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/fivefactsaboutolderpeopleatwork/2016-10-01
[2] Research Plus conducted an independent online survey for Prudential between 29 November and 11 December 2017 among 9,896 non-retired UK adults aged 45+, including 1,000 planning to retire in 2018.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED, AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

Maximising retirement income

Time to start looking at accessing your pension?

Income drawdown is a way of using your pension pot to provide you with a regular retirement income by reinvesting it in funds specifically designed and managed for this purpose. The income you receive will vary depending on the fund’s performance.

However, worryingly a third of people using income drawdown (32%) to fund their retirement have no investment experience, yet two in five (41%) of these have not received either financial advice or guidance, according to new research[1].

Taking advantage of new pension freedoms
Almost half a million (431,581)[2] people are taking advantage of new pension freedoms to draw down their retirement savings, yet the highest proportion have never actively invested in the stock market. Despite being first-time investors, tens of thousands have not sought regulated financial advice or guidance, even though they have an average drawdown pot of £153,000.

You can normally choose to withdraw up to 25% of your pension pot as a tax-free lump sum. The rest is moved into one or more funds that allow you to take an income at times to suit you.

Some people use it to take a regular income. The income you receive might be adjusted periodically depending on the performance of your investments.

Flexi-access drawdown – introduced from April 2015, where there is no limit on how much income you can choose to take from your drawdown funds.
Capped drawdown – only available before 6 April 2015 and has limits on the income you can take out; if you are already in capped drawdown, there are new rules about tax relief on future pension savings if you exceed your income cap.

Lack of professional financial advice
The study warns that a lack of professional financial advice and guidance could leave retirees at risk of running out of money in retirement. Poor decisions in drawdown can lead to consumers taking on too much risk, missing investment growth or making unsustainably high withdrawals. Women in particular were more likely to be first-time investors, potentially putting them at greater financial risk (41% vs 29%).

Findings highlight a ‘first-time investor gap’ is being driven by a lack of consumer understanding of drawdown, with almost half of novice investors who had not received advice saying they thought drawdown would be simple (47%). A further third (29%) claimed they were confident in their investment decisions, despite having no previous experience of actively investing.

Navigating the complexities of drawdown
The research also reveals that one in ten (10%) UK adults not getting advice rely on search engines to help them navigate the complexities of drawdown, while one in five (20%) look at newspapers and magazines. Pension firms were the leading source of guidance for a third (35%) of consumers. Worryingly, though, 44% of all those in drawdown confessed there is nothing that would prompt them to get professional financial advice or guidance.

Some drawdown providers might offer retirement income products that combine income drawdown with other features that might offer guarantees about income and/or growth.
Income drawdown products are complex. Remember that you don’t have to take income drawdown from your current pension provider. You should shop around. τ

Source data:
[1] Study carried out for Zurich UK based on a YouGov survey of a UK sample of 742 people who have moved into drawdown since the pension freedoms were introduced in April 2015.  The survey was carried out between 14 December 2017 and 24 January 2018.
[2] FCA Data Bulletin (issue 12) shows 345,265 pots moved into income drawdown between October 2015 and October 2017. Assuming the number of people moving into drawdown continued at a similar rate from November 2017 to April 2018, this would equate to a further 86,316 people in drawdown. 345,265 + 86,316 = 431,581

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED, AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

Generation still taxed

Numbers nearly double in the last two decades

With so much choice on offer, and with frequent rule changes and distinct tax benefits to consider, finding the right vehicle for your retirement planning is essential.

Add to this the number of taxpaying pensioners nearly doubling over the last two decades, and with talk of also requiring pensioners to pay National Insurance on any earnings or even on pensions, the older population may start thinking of themselves as ‘Generation still taxed’.

Detailed figures
The analysis[1] shows that between the mid-1990s and the mid-2010s, the number of taxpayers over the age of 65 nearly doubled from 3.32 million in 1995/96 to 6.49 million in 2015/16, the last year for which detailed figures are available. It is estimated that the number has broadly stabilised since then and stands at around 6.37 million in 2018/19.
The data covered every local authority in the UK and provided separate information for men and women. The data relates to the 6.87 million taxpayers over State Pension age in 2015/16 and includes around 400,000 women over State Pension age but under the age of 65.

Employment income
Amongst the 6.87 million taxpaying pensioners, the average annual tax bill is £3,522. For the 3.87 million men, the average bill is £4,341; for the 3 million women, the average is £2,467. More than a quarter of taxpaying pensioners are still in paid work – 1.5 million have employment income, and 0.5 million have income from self-employment.

The total amount of Income Tax paid by pensioners in 2015/16 was around £24 billion. Of this, around £21 billion came from England, £1.7 billion from Scotland, £0.8 billion from Wales and £0.4 billion from Northern Ireland.

Local authorities
The five local authorities with the highest total tax bill by pensioners were Surrey (£961 million), Hampshire (£763 million), Essex (£756 million), Greater Manchester (£646 million) and Kent (£645 million). This means that pensioners in Surrey are paying more in Income Tax than pensioners across the whole of Wales.
When planning for retirement, it is vital to remember that the tax office will still want a slice of your income, which reinforces the need to put aside enough to secure a decent standard of living, even after the taxman has had his slice.

Source data:
[1] Royal London Freedom of Information Act request – data for 2015/16 for taxpayers over pension age, broken down for each local authority in the UK and for men and women separately. Data gives the number of pensioner taxpayers in each area and how much tax they pay. It also shows how many have income from self-employment, employment, pensions, property and other sources.

Investing in your child’s future

Without planning ahead, the cost can be a huge money sink

While many parents value the standard of education offered by independent schools or universities, the costs can be daunting. However, with careful planning, it may be possible to avoid a huge outstanding student loan or tax burden.

A good education will give your children or grandchildren the best start in life. With more parents choosing to opt out of state schools and educate their children privately, plus some children continuing their education into their early twenties, the costs can carry on for many years.

Financial sacrifice
The overall cost for just one child can end up being about the same as buying an average home in the UK. That’s a massive financial sacrifice for many parents, leading them to wonder if it’s better to pay for their child’s education or save the money to help them onto the property ladder later in life. In any case, without planning ahead, the cost can be a huge money sink or lead to further borrowing. Since 2004, private school fees have increased by 70% – at a much faster rate than inflation and UK salary growth.

Private school fees continue to rise much faster than inflation or average earnings, making it more important than ever for parents considering taking this route to plan ahead.

What to consider

Expect fees to rise – on average around 3.5% a year – Inflation, growth in salaries and increased amount of interest from wealthy families in Asia and Russia wanting to send their children to English boarding schools, mean that private education fees may continue to grow.

Don’t assume the cost will end at fees – School uniforms and regular school trips all add up. There will be extra-curricular activities like art, drama, music, and sport to absorb as well.

Boarding can be more than double the cost of day school – By deciding not to board, annual savings of around £15,000 annually per child can be made. So, consider the location of the school, and consider whether it is feasible to commute every day or weigh up the advantages of relocating close to the chosen school.

Mixing private education with state education – Many parents are now delaying private education until secondary school to reduce the cost to below £100,000.
Planning for and researching the right school is often the exciting element, particularly when Open Days allow tours of delightful schools in bucolic surroundings. The hard work starts when analysing how the long-term annual costs are going to be paid for.

Suggestions on how to manage the costs:

Start planning early – put simply, the financial planning can’t start early enough, even to the extent of allocating money before any children are born. Simply paying school fee costs from current income or capital removes the ability to benefit from the 8th wonder of the world (according to Einstein), which is the magic of compounding returns.

Advance schemes – if you can afford to pay for several years in advance, you may be able to get yourself a good deal from the school. Some schools offer to put that lump sum in low-risk investments – and because of their charitable status, they’ll avoid paying capital gains tax on any returns they make. In exchange for pre-payment, a fee discount will be offered by the school. There are terms and conditions and strings attached, but this is worth investigating.

Bank of grandparents – grandparents may want to consider helping to pay for grandchildren’s school fees or additional extras such as schoolbooks, trips and uniforms. If grandparents do have the capacity to help financially, this could mean that a useful by-product could be a reduction in their own Inheritance Tax liability, along with the joy of the gift.

Discounts and scholarships – although discounts aren’t always publicised and can sometimes be discretionary, it costs nothing to ask. A lot of private schools are willing to provide discounts for enrolling multiple children or even paying fees by monthly direct debit. Always ask about any scholarships or bursaries your child might be eligible for. According to the Independent Schools’ Council, a third of children educated at a private school now receive some sort of help with fees.

Good alternative option
Private education is not a feasible option for every family, and with an excellent selection of state schools on offer, it doesn’t have to be the only good option. There are many other ways to invest in your child’s future. For example, if you invested the money you would have spent on day school fees for a full 14 years on your child’s behalf, you could provide a sum that could be used to potentially fund university, buy them a house, learn a new skill or set up their own business.

Should I stay or should I go now?

Key aspects that influence retirement decisions

Whatever you want to do when you retire, the better prepared you are, the more rewarding it will be. It’s important to assess the key aspects that will influence your retirement, as the decisions you make can have a real impact on your savings. There are some important considerations to think about.

Timing
Drawing savings too early is likely to result in lower returns and/or lower lifetime income
Drawing savings later may not result in higher returns – this depends on how you invest and use your savings

Capital requirements
Many people withdraw capital from their pension savings not because they ‘need’ it but because they can, and they end up just retaining it in a less tax-efficient environment
Meeting income needs from capital could be extremely efficient – it may even be necessary

Income requirements
There are choices to make between generating income now versus providing for your future
You may also continue earning some income during retirement through paid work, business ventures or even lucrative hobbies
Your income needs are likely to vary over time, and some expenses are fixed while others are variable. Most critically, long-term care can prove expensive
Your income preferences are also key – having a known stable income source may be preferable to having a higher but less stable income
Generating surplus income is inefficient from a tax perspective

Attitude to risk
This is the trade-off between relative safety (which you may choose out of concern) and taking risk (which you may choose with an aim of achieving growth). Your attitude may also change as you accumulate wealth (because you have more to lose) and as you get older (because you have less time to recover if your investments fall in value). But risk is never completely eroded – even with cash or an annuity.

You also need to ask yourself some of the following questions:

What is my life expectancy, and how much money will I need to achieve my retirement plans?
How could my income and capital needs change in the future?
Do I have an effective plan to leave a financial legacy?
How much money would my spouse/partner need if I die before them?
How might I protect against the effect of inflation?

Seize the day – today

Make your vision a reality

Exactly how much you’ll need for a comfortable retirement will depend largely on your cost of living and lifestyle choices. For many people, retirement is about sun-soaked holidays, leisurely rounds of golf and that boat they’ve always coveted.

But retirement is not what it used to be, with more of us working longer to build up our decided retirement income. So it’s essential to reassess how much you’re saving into your pension if you want to make your own vision a reality. For many people, retirement may seem a long way off, and saving into a pension isn’t always a top priority.

But the simple truth is the earlier you start, the easier it will be. If you have less time to invest, then the amount of money that you have to save is likely to be higher to make sure your retirement planning is on track. We’ve provided some ideas to help improve and boost your savings for a more comfortable retirement.

Starting point for your retirement plan
Working out what pensions you already have should be a starting point for your retirement plan. Locate the latest statements you have for all your pensions, including from previous employers and personal pensions. You can also get a forecast of your state pension via www.gov.uk/check-state-pension.

You should be sent an annual statement for each of your pension schemes, including any employer-based arrangements and personal pension plans, even if you are no longer contributing to them. If you don’t have up-to-date statements, you can ask for these to be sent to you. You may also be able to access pension values online via your pension company/scheme website.

Valuing your pension
As well as telling you what your pension is worth now, annual statements will also detail what your pension might be worth at retirement. These forecasts (don’t think of them as anything more than rough estimates) will be based on a range of assumptions including investment growth and inflation between now and retirement.

It is important to consider the effect of inflation because, over time, this can significantly reduce the spending power of your pension.

Cost of your lifestyle
Whether your pension will be enough to pay for the retirement you want will depend on the savings pot you amass, as well as the cost of your lifestyle when you retire.
Working out what income you will need in retirement may not be straightforward, however. Your life in retirement will be different from your working life; some costs may go up, while others will reduce.

You may spend more on holidays and leisure (especially in the earlier years of retirement), but your housing costs may be lower. While you may no longer have the costs of bringing up children, you may still want to help them financially, and there could be grandchildren to think of. In your later retirement years, you could have care costs. The traditional rule of thumb has been a target pension income of two thirds of your salary.

Know your magic number
Having accounted for the State Pension and any defined benefit scheme pension, you need to calculate how much money you will need to save to produce the remainder of your target income. This can depend on factors such as the age you want to retire, income yields available on investments, how much prices rise during your retirement and how long you live for – and how much you have put aside already.

If you contribute through a workplace pension, your employer will also contribute on your behalf, and you could qualify for National Insurance savings using a so-called ‘salary sacrifice’ arrangement. Employer top-ups in particular can significantly increase the value of your pension contributions, so it is worth checking that you are making the most of any workplace generosity offered.

It’s also important to be aware that there is a limit on the size of overall pension savings you can accumulate – currently £1.03 million (for 2018/19, and rising annually in line with inflation) – without facing a hefty tax charge of up to 55% on the excess.

This Lifetime Allowance (LTA) for pensions could also be a challenge for people whose retirement savings are currently less than £1 million, as well as individuals with sizeable final salary pension entitlements. Investment growth and ongoing contributions could lead to your breaching the LTA in future.

Alternative wealth opportunities
Pensions are not the only way to save for retirement. Tax-efficient Individual Savings Accounts (ISAs) are a popular savings option, while many people see property – particularly in the form of buy-to-let – as their retirement nest egg.

Timing is everything
Pension freedoms have now given retirees considerable flexibility over how they draw an income or withdraw lump sums from their accumulated retirement savings. Pension savings can be accessed from age 55. You no longer have to purchase an annuity – an income stream for life – and you can choose how much income you take and when to take it.

You could take your whole pension fund as cash in one go – with 25% being tax-free and the rest taxable. Other options include taking a lump sum now, with further withdrawals when you want, or an ongoing regular income (via so-called drawdown or an annuity). However, the danger of these pension freedoms is that people withdraw too much money too quickly and risk running out of money before they die.

It is also possible to pass on your pension savings completely free of tax. So, as well as being a tax-efficient way to invest, pensions can be a very useful way to reduce Inheritance Tax bills.

Seize the day – today
Too many people fail to seriously consider how they are going to manage financially in retirement until they are about to retire. It is only then that they discover that their pension is not on target to meet their retirement aspirations.

When you are living a busy life, it can be difficult to find time to consider your long-term plans. Your mortgage or your children’s education might be more immediate financial priorities; your career or running your business can make more pressing demands on your time. However, getting your pension on track as soon as possible could save you and your family a financial headache later on.

Another reason to take advantage of existing pension tax breaks is that there is no guarantee they will be there in the future. The Government has already cut the annual allowance to £40,000 – and as little as £10,000 for very high earners – while reducing the lifetime allowance from its £1.8 million peak in 2011/12. Higher-rate Income Tax relief on contributions could be next, so it makes sense to make the most of what’s on offer now.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Investing for Tomorrow’s Social Responsibility

If you aren’t already aware, it may not surprise you to know that Investing for Tomorrow are heavily involved with our local community. We sponsor more than one charity and even the local rugby team. Here’s a rundown of recent and upcoming events.

Overgate Hospice

We were very proud to be among the sponsors at the hospice’s annual summer garden party and even more so for their very first firewalk coming up on October 13.

Be sure to like our facebook page to stay updated on new events.

Halifax Rugby League Football Club

We’ve worked closely with the club for some time now and are really happy with the new warm up shirts for the Super8’s games.

Laurence Turner said:

“The club is incredibly important to the local community and we’re a company that is determined to be a positive local contributor wherever we can.”

WhiteKnights Yorkshire Blood Bikes

  

Our very own founder and managing partner, Laurence Turner volunteers with this local charity to provide free ‘out of hours’ transportation of blood and other vital supplies to the NHS and hospices throughout the region.

Laurence commented:

“I am thoroughly enjoying my volunteering with the Whiteknights and I’m looking forward to many more shifts to come. Juggling work with volunteering hasn’t been easy and in the heat it can be tricky to ride but it’s something I’m very committed to. Helping the charity is extremely important to me; It’s a very rewarding way to give back.”

 

 

 

 

 

Pension paralysis

Saving not found to be a financial priority for UK workers

Worryingly, pension inertia is rife across the UK with many Britons failing to make saving for their old age a priority as they fall into a short-term saving trap. Saving for retirement is not looked upon as a priority until workers reach their 40s and 50s, according to new research involving a survey of 2,824 employees at medium and large private sector companies in the UK conducted by LifeSight, Willis Towers Watson’s UK DC master trust.

Instead, leisure and general household costs come up on top, with retirement saving ranked to be the seventh most important financial concern for employees in the UK. Additionally, the number of workers with financial concerns has jumped to 52% from the lower percentage of 46% in 2015, while retirement confidence 15 years after finishing work has fallen from 61% to 55% during that time.

Importance of retirement savings
As the younger generations are set to be in work longer than their predecessors, starting to save from an early age is extremely beneficial. For millennials especially, short-term goals are much more important than long-term savings, and so employers have the added difficulty of communicating the importance of retirement savings to them.
However, even with the ranking falling low on list of priorities, it was found that 67% of British workers consider retirement security important, a percentage found to be greater than that of the last two or three years.

Increased pressure on employers
It was also found that 69% save for retirement primarily through workplace pensions. The UK Government expects one million people to opt-out of workplace pension auto-enrolment in 2019. This means 27.5% of members opting out of auto enrolment by 2019, which would be a rise from 21.7% in 2018 and an estimated 10% today – totalling to 13 million people expected to be outside pension saving by then.

The research clearly indicates that employees are looking for their employers to take the lead with their retirement savings, using their workplace pension as their main means of saving. Even though this adds increased pressure on employers, making sure they are communicating effectively with their employees about the options available to them and the importance of long-term savings is a must.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED, AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

Lasting Power of Attorney

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more people to make decisions on your behalf during your lifetime. The people you appoint to manage your affairs are called the ‘attorneys’. An LPA is a completely separate legal document to your Will, although many people put them in place at the same time as getting their will written, as part of wanting to plan for the future.

During your lifetime

Once you have an LPA in place, you can have peace of mind that there is someone you trust to look after your affairs if you became unable to do so yourself during your lifetime. This may occur, for example, because of an illness, old age or an accident.

Having an LPA in place can allow your attorney to have authority to deal with your finances and property, as well as make decisions about your health and welfare. Your LPA can include binding instructions together with general preferences for your attorney to consider. Your LPA should reflect your particular wishes so you know that the things that matter most would be taken care of.

Required legal capacity

You can only put an LPA in place whilst you are capable of understanding the nature and effect of the document (for example, you have the required legal capacity). After this point, you cannot enter into an LPA, and no one can do so on your behalf.

Many people don’t know that their next of kin has no automatic legal right to manage their spouse’s affairs without an LPA in place, so having to make decisions on their behalf can become prolonged and significantly more expensive.

A Lasting Power of Attorney for health and welfare can generally make decisions about matters including:

  • Where you should live
  • Your medical care
  • What you should eat
  • Who you should have contact with
  • What kind of social activities you should take part in

You can also give special permission for your attorney to make decisions about life-saving treatment.

A Lasting Power of Attorney for property and financial affairs decisions can cover:

  • Buying and selling property
  • Paying the mortgage
  • Investing money
  • Paying bills
  • Arranging repairs to property

Manage your affairs

Without an LPA in place, there is no one with the legal authority to manage your affairs, for example, to access bank accounts or investments in your name or sell your property on your behalf. Unfortunately, many people assume that their spouse, partner or children will just be able to take care of things, but the reality is that simply isn’t the case.

In these circumstances, in order for someone to obtain legal authority over your affairs, that person would need to apply to the Court of Protection, and the Court will decide on the person to be appointed to manage your affairs. The person chosen is appointed your ‘deputy’. This is a very different type of appointment, which is significantly more involved and costly than being appointed attorney under an LPA.

If you wish to have peace of mind that a particular person will have the legal authority to look after your affairs, and you want to make matters easier for them and less expensive, then you should obtain professional advice about putting in place an LPA.