79% of retirees utilising pension freedoms risk ‘later-life financial crisis’

Four in five, 79 per cent, of retirees using the pension freedoms are at risk of a financial crisis in later-life as they have not registered a lasting power of attorney (LPA), Zurich has warned.

According to a recent report, Drawdown: Is it working for consumers? by Zurich, an estimated 1.7 million retirees could be affected financially by 2025, a time where the Alzheimer’s Society predicts that more than a million Brits will be living with dementia.

The study, which is the largest of its kind, looking at the impact of drawdown since the pension freedoms noted that more than 345,000 retirees using income drawdown to fund their retirement have not yet given a family member or friend the legal authority to make financial decisions on their behalf if they no longer can. Without an LPA, even next-of-kin would have to apply to courts to take control of relative’s finances, Zurich highlighted.

Zurcih noted that of those who have moved into drawdown since the pension reforms, only 21 per cent, one in five people have registered an LPA. In addition, those with a financial adviser were almost four times more likely to have an LPA than those who had not sought advice, 66 per cent in comparison to 17 per cent, respectively.

Zurich savings expert Alistair Wilson said: “Registering an LPA has become even more important since the pension reforms. Thousands of people are now making complex decisions on their pension into old age, when the risk of developing a sudden illness or condition such as dementia increases. Despite this, many are unprepared for a sudden health shock or a decline in their mental abilities. The time to set up an LPA is well before you need it, and pension providers should be highlighting this to their customers.

“With more and more people moving into drawdown, this is creating a ticking time bomb that could leave thousands of people facing a potential later-life financial crisis. It is vital that people plan for a time when managing their pension might become hard, or even impossible, and speaking to a financial adviser is one of the best ways to do this.”

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