The longer retirement lasts, the greater the chance of cognitive decline or dependency. Yet many drawdown plans ignore this.
Recognising the emotional tipping point — are people living longer or dying slowly? — opens conversations about vulnerability and health.
A key feature in these discussions is about powers of attorney (POA).
According to Tish Hanifan, founder and joint chair of the Society of Later Life Advisers, discussions about POA or lasting powers of attorney (LPA) should be considered essential at the point of setting up pension drawdown or decumulation plans. “It is almost negligent not to do so.”
Drawdown relies on flexibility, and advisers must ensure that someone can act if the client loses capacity, Hanifan adds.
“The adviser won’t be able to change the Investment strategy to reflect the changes in the client’s lifestyle or priorities unless there is a power of attorney . . . .. obtaining deputyship is expensive and time‑consuming.
“Not raising POA at the outset risks leaving clients unable to adjust investments when life circumstances change.”
Hanifan says POA discussions should also be framed positively: they are about maintaining control, not giving it up.
She adds: “A power of attorney is the greatest way of maintaining control because you choose who makes decisions when you can’t.”
Sticking to the plan
One of the most common misunderstandings about POAs/LPAs is that once an attorney has been appointed, they can do whatever they wish with the donor’s assets.
When the donor lacks capacity, the attorney (or attorneys) needs to act in accordance with the Mental Capacity Act 2005 and its code of practice, so they cannot do whatever they like.
Attorneys face limitations, particularly around making gifts or writing wills, for instance.
They are not allowed to write a will on behalf of a person who has lost capacity unless they have the approval from the Court of Protection.
A registered property and financial affairs LPA can be used while the donor still has capacity, unless it specifies that it cannot.
Rebecca Minto, a director at the Association of Lifetime Lawyers, says it is a common misconception that joint accounts are exempt from mental capacity issues that only affect one account holder.
However, if two people share a joint account and one person loses capacity, unless this person has appointed an attorney to manage the account on their behalf, then the whole account will be frozen.
Heledd Wyn, another director at the Association of Lifetime Lawyers, explains that it is the attorney’s role to act in the donor’s best interest, not their own.
“So, if a situation arises where the attorney might diverge from the client’s original intentions, it’s important that advisers ask questions: who is benefiting from these decisions?” Wyn adds.