Talking about finances in later life
Talking with a loved one about the financial challenges of getting old can be tricky. You may feel uncomfortable asking – and they may not welcome the suggestion that they need help. But the reality is that getting older brings new financial challenges, and tackling it together sooner rather than later will be beneficial for all concerned. There’s also a chance that your relative won’t be able to deal with such decisions on their own later on.
There are several reasons why you might feel that your loved one is beginning to need help to manage their finances.
- They are becoming confused or overwhelmed with all the details and simply want a helping hand.
- They are temporarily unable to deal with things, for example being ill or in hospital.
- They have a physical disability, such as a mobility problem, which makes it difficult to visit the post office or the bank; a dexterity problem, which prevents them from writing cheques; or a sight-related problem, such as macular degeneration, which means they find it difficult to read official forms.
- They are living with dementia or have another condition likely to affect their capacity to understand and make decisions.
Your loved one might ask you for help, or you might notice that they’re struggling and have to raise the subject yourself.
Starting a conversation about money can be difficult, so you could begin by asking them to share some of their own financial knowledge and experience with you. Starting with a positive, such as checking if they are eligible for extra benefits, can also be a good way to start talking about finances together, or try using a report in the news about savings or pensions as a way into the conversation.
Remember that it’s their money and they should be in control as far as possible. For more support, read our advice about starting a conversation.
First steps to managing someone else's accounts
If your loved one wants you to help with their financial affairs or has a deteriorating illness that might ultimately affect their mental health, it’s a good idea to sit down together and carry out a mini audit of their finances.
Make a list of all the organisations they deal with, plus any relevant account/customer numbers. Establish where they keep any relevant paperwork, so that you can find it later if you need to.
Ask them about their wishes and preferences. For example:
- Who do they bank with?
- Where do they keep any savings?
- What are their future plans for any savings/investments?
- Who is their electricity provider?
- Could they switch to a better deal?
It’s also a good idea to keep an eye on the amount of money in their current account, as they could be vulnerable if they lose their debit card when out shopping or fall victim to a scam. If they have large sums in a current account, discuss the possibility of transferring some to a savings account.
Don’t ask your loved one for details of their passwords or PIN numbers as accessing someone else’s account with these is a criminal offence and you would be in breach of the account’s terms and conditions.
Did you know?
- You can compare energy prices at Which? Switch.
- Which? also offers advice on how to switch to a better broadband provider.
Set up a Power of Attorney
One of the most valuable things you can do is to discuss setting up a Power of Attorney (PoA) if your relative hasn’t done so already. In fact, you might consider setting up one yourself at the same time. Appointing a Power of Attorney allows someone else to manage your day-to-day finances, such as paying bills and banking, should you become unable to do so in the future.
The PoA won’t need to be triggered immediately, but it’s important to set one up while your relative has mental capacity. If this paperwork is left too late, it becomes far more complicated.
Managing bank and building society accounts
Until such a time as a Power of Attorney might need to be actioned, there are several ways you can help a relative or friend manage their bank and building society accounts. Your loved one will, of course, have to give their permission for any of the suggestions below.
This is a document that tells your bank, building society or other account provider that they can accept instructions about your money from a specific named person. It gives that person the authority to run only your bank account for you.
Your relative would need to contact their bank to ask for a ‘third-party mandate’ form. After they’ve signed and returned this form, the appointed ‘third party’ (you) will be allowed to make calls, query statements and operate the account(s) on their relative’s behalf. You won’t be allowed to arrange a formal overdraft or open or close an account.
Another option might be to set up a new joint account for bills, so that you and your loved one have joint access to manage the account online or deal with problems. However, bear in mind that there would be tax and other implications to opening a joint account. Each account holder would be liable to pay any Income Tax and Inheritance Tax as well as being jointly liable for any debts.
If you are concerned that your relative might inadvertently lose or overly use any credit cards they possess, discuss the possibility of cancelling them. You could otherwise talk about decreasing the credit limit so there is less chance of fraud if the card is lost or stolen, or your loved one falls victim to a scam.
Paying household bills, such as electricity, gas, telephone, water and Council Tax, can be an additional worry. If your relative is paying bills at the Post Office or by cheque, there is the chance that some bills may inadvertently not get paid. To simplify the process, discuss setting up direct debits or nominating a third party.
Setting up direct debits
Setting up direct debits for regular bills, such as gas and electricity, could help to simplify things. Your relative will have to contact their service providers to request a direct debit mandate and sign the forms.
Some organisations offer discounts if you pay by direct debit, so if your loved one is resistant to the idea of money leaving their account in this way, they might be encouraged by the thought of saving money. Smaller monthly direct debits can also help them to budget if they’re on a limited income.
Nominating a third party
Under normal circumstances, utility companies will only speak to the named account holder, but it’s usually possible to nominate a third party to deal with providers. Again, your relative will need to set this up by contacting the service provider and explaining the situation. The company will explain what to do next.
As the named third party, you will receive copies of bills and be able to pay them (if a direct debit hasn't been set up), but you won’t become liable for them.
For more tips on managing finances in later life, read our guide to later life money:
You might also want to consider maximising savings in case of more expensive care needs in future.
The Which? Money Compare savings comparison tables can help make the most of savings. Rather than being guided purely by interest rates, check whether the type of account offers instant access (or a reasonable notice period) to savings, or whether the money is locked in and cannot be accessed for several years, as care bills may need to change at short notice.
If you have investments, we recommend you talk to a qualified independent financial adviser (IFA), preferably a specialist accredited later life adviser, such as a fully listed member of the Society of Later Life Advisers (SOLLA).
Society of Later Life Advisers (SOLLA)
By choosing an accredited member of the Society, you can be assured of someone with the expertise to best understand your needs to provide advice that is right for you and your family.
For more guidance on finding an IFA, see how to find a financial adviser on Which? Money. You might find it helpful to have a family member at this discussion.
From reviewing your pension options to making a will, here’s how to put a financial plan in place for later life.
What is a Power of Attorney and why should you set one up? We also explain about Lasting Power of Attorney.
Read about the benefits available in later life: Attendance Allowance, PIP, Winter Fuel Payment and more.