Does 'creaking' power of attorney service need urgent reform?

A legal failsafe for people who can no longer fend for themselves needs a major overhaul, says consumer group Which?

Lasting power of attorney allows people to appoint someone they trust, usually a family member or friend, to take control of their affairs if they fall ill.

The ‘creaking’ system is in desperate need of improvement, with the public having poor understanding of how it works, while bank red tape hampers attorneys’ ability to exercise their duties, according to new research from Which?

Planning ahead: Lasting power of attorney helps families take over if illness or accident strikes a loved one

There are two types of LPA, covering finances and health, and registrations have surged in recent years to cover around five million people.

Government proposals to modernise the system, like digitising the registration process and improving awareness, need to be acted on urgently to make it fit for purpose, says Which?

The LPA service is run by the Office of the Public Guardian, an arm of the Government, which is also consulting on plans such a fast-track to grant LPAs to those who need them urgently and removing the requirement for a witness.

Which?’s survey of 2,000 people across the UK found:

– Some 85 per cent said they know what LPA is, but only 15 per cent said they would give someone else power of attorney over their affairs

– This could be explained by 16 per cent mistakenly thinking they would lose access to their financial accounts immediately after an LPA is registered, rather than when they fall ill

– Some 70 per cent of those surveyed who did not have an LPA said they were healthy so did not need one

– And 77 per cent of people incorrectly thought an LPA could be set up at any time in life, when actually after you are incapacitated it involves your loved ones applying for deputyship, a complicated and costly court process – see the box on the right.

Separate Which? research among more than 8,000 of its members with a registered LPA found they encounter problems when dealing with financial institutions, particularly banks.

Some 60 per cent reported lack of knowledge of LPAs among staff, 38 per cent complexities in the process, and 28 per cent delays.

Nearly a third said banks were the most difficult to deal with, and complained they lost LPA documents, failed to properly explain the registration process, and required them to make unnecessary trips to a branch.

Which? said it heard from people asked to register in-branch in the middle of the Covid-19 pandemic, even by banks which offered online registration as an option.

Meanwhile, after registration people face a mixture of rules, with some banks not authorising full access to accounts by LPA holders, or barring them from telephone or app banking services, or online banking.

Which? called for consistent industry standards and modernisation of access granted to accounts and the registration process. And it urged the OPG to work harder to improve awareness of and access to LPAs.

‘People who take on the responsibility of helping a family member or friend to deal with their financial affairs should not have to jump through hoops when dealing with banks, but our research reveals many are still facing an uphill struggle to put the legal arrangement in place,’ says Jenny Ross of Which?

‘The creaking power of attorney system needs urgent improvement, particularly to address the public’s lack of awareness of how the process works and the difficulties people face when registering with banks.

‘This problem has been going on for years.’

The Ministry of Justice was asked for comment but did not respond before publication. 

What do financial experts and lawyers say?

‘A lasting power of attorney should be a huge source of comfort as we get older, but for far too many people, it’s a source of mistrust and confusion instead,’ says Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown.

‘Knowing you have someone you can trust to take decisions in your best interests in the event you are unwilling or unable to do so yourself can be very comforting not just for you but your wider family too.

‘Unfortunately, we’re letting myths and misunderstandings confuse us into missing out on this vital bit of safeguarding.

‘It’s important to bust key myths about LPAs. For instance, you do not hand over control of your affairs once an LPA has been registered – you remain in control and your attorneys must make all reasonable efforts to help you make decisions.

‘Should a time come when decisions need to be made on your behalf your attorneys need to demonstrate they are making decisions in your best interests and in line with your wishes. You can appoint more than one attorney if you want more visibility of decision making and attorneys can be removed if needed.

‘People tend to worry about rare horror stories of vulnerable people befriended by fraudsters who use a power of attorney to take their money. However, a power of attorney can actually protect you from this kind of thing.

‘Some conditions, like dementia, can make it difficult for people to understand who to trust or the consequences of their actions, so putting someone reliable in charge of their financial decisions protects them from giving it away to fraudsters or con artists.’

Michael Culver, chair of Solicitors for the Elderly and managing director of Culver Law, says: ‘The legal sector has recognised that there are issues regarding the understanding and handling of financial and property lasting powers of attorneys at banks.

‘SFE, as part of our work with the Vulnerable Banking Group, has worked closely with the UK’s leading banks to improve standards and increase awareness of the needs of vulnerable and bereaved people and the professionals and carers who support them.

‘An LPA is a powerful legal document that allows an attorney (of your choice) to make decisions about how to spend your money and manage your assets if you are unable to do so yourself.

‘This includes paying your bills, care home fees and living expenses. It is crucial that staff at banks understand how these are implemented and what their limitations are.

‘There’s a long journey ahead, however, the sector is taking positive steps to rectify these issues and banking institutions are responding positively to our guidance.

‘We’ve worked closely with them to develop and advise on policy changes. Some banks have already begun implementing these changes in branches across the country.’

Nicholas Hamilton, chartered financial planner at Mazars, says: ‘Conversations about LPAs are often met with surprise.

‘Clients who consider themselves to be young, fit and healthy often don’t think they need an LPA agreement but this is a common misconception.

‘LPAs are one of the most important legal documents an individual should have in place – mental incapacity can come about at any time, any age, regardless of underlying health conditions. They should form the foundation of financial planning.

‘It can be complex to apply for deputyship through the Court of Protection, when LPAs are not in place, as well as costly and time consuming.

‘Work does need to be done to improve the current system and encourage more people to put this cornerstone of financial planning in place.’