The Mental Capacity Act and Its Impact On Your Retirement August 13, 2020

Since the implementation of the Lasting Power of Attorney (LPA) through the Mental Capacity Act in Singapore in 2007, applications of the LPA to the Office of the Public Guardian (OPG) have increased manifold. As of March 2018, 43,000 LPA applications have been made according to the OPG (Office of Public Guardian)1, the agency that protects the interests of the mentally incapacitated. In the first 8 months of 2018 alone, 16,279 individuals applied for an LPA. This number far exceeds the 13,919 and 2,373 individuals who applied in 2017 and 2013 respectively.
As a Certified Financial Planner, I had expressed my concerns in a timely Straits Times forum letter on 18 March 2006 and the potential solution of having the Lasting Power of Attorney in Singapore with the title “Have Enduring Power of Attorney for the Ageing”2. In Oct 2018, I am heartened by the update of “Applications for Lasting Power of Attorney Soar” on the Straits Times3.
A recent significant development of the LPA in Singapore is the newly-launched Professional Deputies and Donees (a donee is a person who is given a power of appointment) scheme. Now, an individual who is mentally sound can hire and appoint a Professional Donee to make decisions on his behalf should he loses his mental capacity in future.
This development provides an additional option of having corporate trustees as an individual’s LPA Property and Affairs donee, in addition to their LPA financial decision-maker.
As more Singaporeans enter retirement age, more attention needs to be given to the LPA as a tool to plan for one’s retirement. When the Full Retirement Sum4(FRS) of $181,000 and Basic Retirement Sum (BRS) of $90,500 are invested in CPF Life for individuals who turn 55 years old in 2020, a significant number of those approaching their retirement years may invest their retirement monies in different asset classes to support them in their golden years. The investments may include securities such as equities and bonds and even rental income from overseas properties. These individuals may be capable and willing to spend their time managing their own investments immediately following retirement; but priorities in retirement can change quite quickly, so may capability.
With more individuals making complex decisions on their retirement monies, the risk of being unprepared in handling retirement finances increases, especially in the event of developing an illness or condition such as dementia. It is hence, important to set up an LPA before one needs it.
It is vital that one plans ahead before preparation for retirement becomes difficult, or even impossible due to a decrease in mental capacity. One option for planning ahead is to select a corporate trustee, but do take note to exercise prudence in your selection even though a professional corporate trustee has higher accountability and a more reliable presence. Speaking to a trusted estate planning financial planner will help with this decision-making process.
Contributor:
Irene Yee
Certified Financial Planner, MBus
Affiliate of Society of Trust and Estate Practitioners (STEP)
Phillip Securities Pte Ltd (A member of PhillipCapital)
Email address: ireneyeekq@phillip.com.sg
Reference:
- [1] https://www.msf.gov.sg/opg/Pages/Home.aspx
- [2] https://eresources.nlb.gov.sg/newspapers/Digitised/Search?ST=1&AT=search&k=Enduring%20Power%20of%20Attorney
- [3] The Straits Times “Applications of Lasting Power of Attorney Soar”, 22 October 2018https://www.straitstimes.com/singapore/applications-for-lasting-power-of-attorney-soar-0
- [4] https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme
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About the author
Ms. Irene Yee
Certified Financial Planner, MBus
Affiliate of Society of Trust and Estate Practitioners (STEP)
Irene Yee is an award-winning estate planning financial advisory consultant with more than 20 years of practical experience in financial advisory, including banking. As an Affiliate of Society of Trust and Estate Practitioners (STEP), her integrated solutions in estate planning for clients include the use of Wills, Trusts and the Lasting Power of Attorney (LPA) and funding solutions such as insurances. Irene's forum letter to the Straits Times in 2006 contributed to the legislation of the Lasting Power of Attorney (LPA) through the Mental Capacity Act in 2008; the letter highlighted Singapore's need for the LPA in our ageing society before the LPA existed here. She is a Certified Financial Planner who has also published articles in retirement planning, including "Estate Planning for the Singapore Property Owner" in FPAS* Journal (March 2020). Other personal finance articles she had written were also published in "Her World", "Simply Her", "Young Parents", "Today's Parents" and "ExpatLiving Singapore". * Financial Planning Association of Singapore