Are the Financial Conduct Authority’s proposals for digitising Lasting Powers of Attorney in the best interests of the individuals delegating their decision-making powers, asks Rebecca Waterhouse
The population of the UK is ageing. Between 1975 and 2015, the proportion of the population aged 65 years or older grew from 14.1 per cent to 17.8 per cent, and this proportion is projected to continue to grow to nearly a quarter of the population by 2045. For the legal and financial sectors, this brings new challenges.
In last week’s blog, we discussed the Law Commission’s recent consultation on the modernisation of the current Victorian-era laws surrounding the making of a will. Similarly, in a recently published report by the Financial Conduct Authority (FCA) into how access to financial services could be improved for an ageing population, the focus was on digitisation of Lasting Powers of Attorney (LPAs).
LPAs are used by individuals to allow a trusted person to make decisions and sign documents on their behalf after they have lost mental capacity. Appointing an ‘attorney’ can give an individual comfort about the running of their affairs and important decisions about their care in the event that there is a time when they cannot make those decisions for themselves. Attorneys have strict duties under the law and must always act in good faith and in the best interests of the person who appointed them.
There are two types of LPA: the ‘financial decisions’ LPA, which allows the attorney to take decisions relating to property and financial affairs and were the focus of the FCA’s report; and the ‘health and care decisions’ LPA, which allows the attorney to take decisions relating to health care and living arrangements.
Currently, both types of LPA are in a prescribed form and both must be registered at the Office of the Public Guardian (OPG) before they can be used. It is possible to create LPAs using an online government portal but the documents must then be printed, signed and submitted to the Office of the Public Guardian by post.
In its report, the FCA suggests that the OPG should develop more customer-friendly approaches to setting up, registering, storing and understanding LPAs. While acknowledging that the paper element of LPAs can reduce the risk of fraud, the FCA goes on to suggest that ‘creating a secure, centralised online database of registered LPAs could reduce administrative pressures on firms and carers by removing the need for physical paperwork, and reduce the length of time it takes to set up LPA’.
In a digital age this may seem like a logical and convenient next step. But with growing concerns surrounding cybercrime, and recent reports alleging inadequate supervision of LPAs and noting the risks of misuse, is an ‘easy access’ simplification of the system really in the best interest of the individuals entrusting their decision making powers to others?
Sharing or handing over financial control is daunting, and the formality of the current process is fitting of the magnitude of the decision. However, in the cold light of day it is objectively an obvious and very important stage in the financial planning life cycle of any individual. The FCA report also notes that much more could be done to normalise the concept of delegating financial access. With this ageing population, there will only be an increase in the number of individuals who require support accessing and managing their finances and while many people are familiar with planning for their death and making wills, fewer are comfortable planning for others to make decisions on their behalf should they lose mental capacity.
Since publication of last week’s blog on the digitisation of wills, an Australian court has upheld a draft text discovered on the phone of the deceased as a valid testamentary document. Whether or not this is a sign of things to come remains to be seen. For the time being, the formalities required to create an LPA should be reassuring for those delegating powers to others and LPAs remain an invaluable tool for individuals planning for their future financial wellbeing.
Rebecca Waterhouse is an associate at boutique private wealth law firm Maurice Turnor Gardner LLP