What happens if you fall ill whilst in pension drawdown without an LPA?

September 24, 2018

 

 

Nearly four out of five retirees on income drawdown could face hardship in later life because they haven't set up a Lasting Power of Attorney (LPA), new research has revealed.

 

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Without this vital legal document, your next of kin or family will not be able to control your finances including pension income from a drawdown scheme. If a pension policy holder doesn't have the mental or physical ability to control and manage their pension the next of kin must apply to the Court of Protection if there is no registered LPA in place, warns pension companies.

 

What happens if you do not have a Property & Financial Affairs LPA?

 

Your next of kin must apply to the Court of Protection, they aim to resolve the matter in an average of 16 weeks but it might take up to six months to gain the powers required to control your finances.

 

Once mental capacity is lost, it’s too late. The courts will be involved in deciding who will control your finances, they will be known as your deputies and manage the persons affairs – this may not be who the person wanted it to be. A deputy is usually a family member or someone who knows the person well. A deputy can make decisions about someone's person’s personal welfare, property and financial affairs.

 

'If there's no friend or family member who are suitable or willing to act as a deputy, the Court of Protection can appoint a professional like an accountant or solicitor from a panel. Sometimes, two or more deputies are appointed. They can be asked to act together in all matters.'

 

You can apply to the Court of Protection without a solicitor, but it is a complex and costly process if you are not sure what you are doing.

 

The court fees are £400 for each deputyship - health and welfare, and property and finance. You also need a medical certificate, which can cost up to £300.

 

If the court wants to hold a hearing before making the decision it costs a further £500, although these are rare.

 

After that, if you are appointed a deputy you need to pay a £100 assessment fee if you’re new to the job. And you must pay an annual supervision fee depending on what level of supervision your deputyship needs.

 

It's £320 a year for general supervision and £35 a year for minimal supervision - the latter applies if you are managing less than £21,000.

 

If you make an application to become a deputy on behalf of someone you know via a solicitor, the basic fixed cost is meant to be £950 plus VAT, but it can work out at closer to £1,250-2000.

The annual fixed cost of a professional deputy if one is appointed is set at £1,670 for the first year and £1,320 for each year after that, but it can be higher.

 

If a professional deputy is taken on, they would also have to consult a financial adviser to make investment decisions about a pension drawdown scheme, such as how much income to take and the tax implications, which would involve further cost.

 

Court fee of £400 and cost of the medical certificate is payable upfront in most circumstances, but some

solicitor costs are only taken out of someone's funds after their deputies are appointed.

The fees quickly mount up and you could have the wrong person in your eyes controlling your financial and medical future. Creating an LPA today allows you to keep control through the people you trust.

 

 

This is not financial advise, court cost correct as of the date polished. 

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