Your personal pension is often your largest or second-largest investment outside your family home. If you have a flexi-access drawdown pension and unfortunately lose your mental capacity without a Lasting Power of Attorney (LPA), nobody can make decisions on your behalf about your pension. This means that without a valid Property and Financial Affairs LPA in place and registered with the Office of the Public Guardian (OPG), your family can't access or flexibly access your pension on your behalf in any way. They can't ask for a regular income to start or change, take a tax-free lump sum, change investment strategies or move your investments, even if the income is essential to repay a mortgage or to pay for your care. A Property and Financial Affairs LPA enables the people you choose to do all of this for you.
Key Takeaways
- A flexi-access drawdown pension very often needs decisions: when and how you'd like to access income and/or tax-free cash, how much to take, when you take it, and how it's invested. Only you, or someone with legal authority, can make those decisions.
- Your husband, wife or children have no automatic right to deal with your pension, however long you've been married.
- Without an LPA, your family must apply to the Court of Protection to become your deputy, which commonly takes many months and costs far more than an LPA.
- A Property and Financial Affairs LPA enables your attorneys to deal with your pension provider on your behalf as soon as it's registered.
- If an adviser manages your investments on a discretionary basis, your LPA should say your attorneys can keep that arrangement going.
- For the avoidance of doubt, your pension provider can and will only speak to you, or to your legally appointed attorney.
This guide covers England and Wales. Scotland and Northern Ireland have their own systems. It explains how LPAs work with pensions and isn't pension or financial advice.
Annuities and defined benefit final salary schemes
With an annuity or a defined benefit final salary pension in payment, your pension pays you a fixed income for life. Once it's set up, there's nothing to decide.
However, if you're one of the lucky few with a defined benefit final salary pension that isn't yet in payment, perhaps deferred from a previous employment, someone still has to give the instruction before a regular income or tax-free cash can be paid. Once again, the provider can only take instructions from you or your appointed attorney.
Why flexi-access drawdown is different
Flexi-access drawdown is the opposite of an annuity. Your pension pot stays invested and you decide, year by year, how much to take out and when. That flexibility is why so many people choose it. But it means someone has to keep making decisions, often at exactly the time when needs are changing:
- starting a regular income, or taking a tax-free or even a taxable lump sum
- taking a lump sum to pay off a mortgage or a loan
- increasing your income to pay for care at home or a care home
- taking a lump sum for home adaptations, a stairlift or a new car
- taking tax-free cash you haven't yet taken
- reducing or stopping your income
- reviewing how the pot is invested
If you lose mental capacity, through dementia, a stroke or an accident, you can no longer make those decisions. Your pension provider can only accept instructions from you, or from someone with legal authority to act for you.
What happens without an LPA
Any regular income you've already set up may keep being paid, but nobody can change it. It can't be increased when care fees start, and no lump sums can be taken. Your pot simply sits there, unused, while your family looks for the money elsewhere.
The income may land in an account nobody can use. If your pension is paid into a bank account in your sole name, your family may not be able to access that account either. Banks need the same legal authority as pension providers.
There's no simple way round it. For the State Pension and benefits, the Department for Work and Pensions has its own "appointee" system, so a family member can manage those payments without an LPA. Private and workplace pensions have no equivalent.
The only route left is the Court of Protection. Your family would have to apply to be appointed your deputy. That involves forms, medical evidence, court fees and often legal fees, followed by an insurance bond, annual supervision fees and yearly reports. It commonly takes many months. Even then, the court decides who acts and what they can do.
What an LPA lets your attorneys do
A Property and Financial Affairs LPA covers your money and property, including your pensions. Once it's registered, your attorneys can deal with your pension provider just as you would. They can:
- ask for your income to be increased, reduced or paused
- take lump sums when you need them
- take any tax-free cash you're entitled to
- receive statements and deal with the provider's questions
- work with your financial adviser on how the pot is invested
Your attorneys must always act in your best interests and keep your money separate from their own. They can't use your pension to benefit themselves, beyond the limited gifts the law allows.
A Property and Financial Affairs LPA can also be used while you still have capacity, with your permission. That can be a real help if you're in hospital or simply finding the paperwork too much.
If an adviser manages your investments
Many people in drawdown have their pension investments managed by an adviser or investment manager on a discretionary basis, meaning the manager makes day-to-day investment decisions without asking each time.
An attorney can't normally hand their decision-making to someone else. So if you want your attorneys to be able to keep (or set up) a discretionary management arrangement, your LPA should say so. The Office of the Public Guardian suggests including an instruction allowing this. Without it, your attorneys may find the arrangement can't continue, just when you need it most.
This is exactly the kind of detail we check when we prepare your LPA. Tell us if you have investments managed by an adviser, and we'll make sure the wording is right.
Choosing your attorneys
Your attorneys don't need to be financial experts, but they do need to be organised, trustworthy and willing to deal with pension providers and advisers. Many people choose their husband, wife or partner, with their adult children as replacements, or alongside them.
Think about whether your attorneys should act jointly (always together) or jointly and severally (together or on their own). If one attorney has to get the others' signatures for every letter to a pension provider, things can slow down.
Make your LPA while you can
An LPA can only be made while you have mental capacity. Once it's gone, it's too late, and the Court of Protection is the only option.
Registration also takes time. In our experience it takes at least 12 weeks, and longer if a form is sent back for a mistake (see why LPAs get rejected). An LPA can't be used until it's registered, so the time to make it is long before you need it.
Frequently asked questions
Can my husband or wife access my pension if I lose capacity?
Not without legal authority. Being married doesn't give your spouse any right to deal with your pension. They would need to be your attorney under a registered LPA, or your deputy appointed by the Court of Protection.
Will my pension income stop if I lose capacity?
Not necessarily. A regular income you've already set up may continue. The problem is that nobody can change it, take lump sums or make investment decisions without an LPA or a deputyship order.
Does a Health and Welfare LPA cover my pension?
No. A Health and Welfare LPA covers your care and medical treatment. Your pension is covered by a Property and Financial Affairs LPA. Our guide to the two types of LPA explains the difference.
Do I need an LPA if I have an annuity?
An annuity needs far fewer decisions, but an LPA still matters. Your income will usually be paid into your bank account, and your attorneys will need authority to manage that account and the rest of your finances.
The short version: your pension needs someone who can act
A drawdown pension is only flexible if someone can make the decisions. If you can't, and nobody has the legal authority to act for you, your pension is effectively frozen in place, often at the very moment your family needs it. A Property and Financial Affairs LPA, made now while you can, keeps your pension working for you. If you also have a joint mortgage, read what happens to a joint mortgage when one of you loses capacity.
Every LPA we prepare is checked by our Will Team and comes with your own personalised Signing Guide, showing everyone exactly where and in what order to sign. Find out more about Lasting Powers of Attorney.
About this guide
This guide was written and checked by the Downloadawill Will Team. It explains the law in general terms and isn't legal, pension or financial advice for your own situation. Pension providers have their own procedures, so check with yours. Downloadawill is a trading style of Direct Wills. All our Will Writers are Members of The Society of Will Writers. We've been writing Wills and Lasting Powers of Attorney for people in England and Wales since 1997. Read more about us.
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