RegulationSep 29 2017

FCA power of attorney proposals spark scam fears

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FCA power of attorney proposals spark scam fears

Lawyers have warned proposals by the Financial Conduct Authority will make financial abuse of the elderly easier.

The FCA has set out plans for applications for lasting power of attorney to be made online, scrapping the requirement for a pen and paper signature.

At the moment the process of getting lasting power of attorney requires a wet signature, a witness and someone to confirm the donor is of sound mind.

The FCA has also suggested the introduction of ‘carer’s cards’ so a carer would be legitimately be able to access a person’s finances.

But Elaine Roche, partner at JMW Solititors said both of these suggestions will make the financial abuse of the vulnerable and elderly even easier than it is already.

“A person could make an application for lasting power of attorney on someone’s behalf without them even knowing about it, then have their savings cleared out of their account or their property sold from beneath them.

"While it might be true that the next generation of elderly people will be internet-savvy, that can’t be said for current population aged 80 and above.”

An LPA is a legal document which gives the person or persons of choice the power to deal with an individual’s affairs. These people will then become legally appointed attorneys and will be able to use these documents to act on the person’s behalf whenever necessary.

There are two types – the property and financial affairs LPA covering money and property matters, which can be used at any time and even made temporary use of, and the health and welfare LPA covering healthcare decisions which can only be used if people lose mental capacity.

If an LPA is not in place families will have to apply to the Court of Protection, in a process which may cause delays and cost hundreds of pounds.

Around 650,000 applications for LPAs were made last year and around 2.5 million are currently in place, according to official figures. However around 14,500 applications are made each year to the Court of Protection.

The news about the FCA's proposals comes as retirement savers are increasingly concerned about being able to control their finances because of the onset of dementia but are failing to act.

Research by Key Retirement showed 43 per cent of over-55s are extremely concerned about the financial impact of suffering dementia in later life and 47 per cent worry about their partner being unable to access their money.

But just 12 per cent have set up a lasting power of attorney to ensure important decisions can still be taken on their behalf. 39 per cent say they are considering setting up these agreements but have yet to do so.

Dean Mirfin, chief product officer at Key Retirement said: “Numbers affected by dementia are set to double over the next 25 years and it’s essential that families avoid a costly and time-consuming court process.

“Anyone who is taking advantage of pension freedoms or has a drawdown equity release scheme risks having their money frozen if they do not have LPAs until the Court of Protection appoints attorneys. For equity release this means that access to any drawdown facility will be suspended whilst waiting on the court. LPAs are not just about money, they are also about being able to make those important decisions about someone’s healthcare should the need arise.

"Not only is it more cost effective in the long term to do so, you are also ensuring that those who you trust the most are certain to be the ones making important decisions about your finances and your health and welfare when you need them most."

Without an LPA in place families have to apply to the Court of Protection for a Deputyship Order during which time finances can be frozen, or decisions may be delayed.

The cost of the process can start from £400 for an application plus a further £850 plus VAT for the work done up to and including the Deputyship Order, and a further £100 for an assessment of the deputy.

If no deputy can be found a professional deputy will be appointed and for this the charge will be £1,500 plus VAT for the first year, and £1,185 plus VAT for each year thereafter.