- Funeral Plan sales have trebled since 2005*, indicating that more of us than ever are planning ahead.
- But what constitutes a “good” or a "bad" funeral plan? The fact is that funeral plans are not all the same and some of the differences are very significant indeed
- Age Scotland urges prospective buyers to carefully consider different products and options, including Age UK Funeral Plans, before deciding to buy and explains what to look out for.
Sales of funeral plans have trebled since 2005* in the UK and gone up by a massive 25% since 2015 alone. This explosive growth is probably due to more people recognising that a funeral is becoming increasingly expensive, making the advantages of funding it in advance, in full or in part, all the more attractive. For example, the latest indications are that a cremation funeral will cost up to £6,700 in ten years’ time but that taking out a funeral plan now could save in excess of £3,000**.
Buying a funeral plan is an important decision, and not one to be taken lightly considering the sums involved. It can make excellent financial sense, but Age Scotland urges older people to carefully examine the affordability of a funeral plan and weigh up the risk of parting with that money to reduce the potential risk to family.
It’s also just as important to review all the products and options available to make sure people get the right deal for themselves. Funeral plans are not all the same, even if they may seem it at first glance. Some of the details can make a really big difference: the funeral plans available offer varying levels of cover, service and, most importantly of all, greater or less financial value.
Logan Steele of Age Scotland offers the following expert guidance on what to consider when buying a funeral plan:
1. “First of all, make sure you understand what is included in the funeral plan, and, especially, what costs are and are not covered. If you intend a cremation funeral, it makes sense to find a plan that guarantees to cover the costs of a cremation, including the funeral director's costs, the cremation fee and any minister's’ fees. A plan that only provides a contribution to these fees – rather than a guarantee to pay them all – will in all likelihood leave a short-fall.
2. “If you prefer a plan or provider that makes just a contribution to costs – rather than guaranteeing to cover them all – make sure you check that the contribution increases each year at least in line with general inflation or again there may be a short-fall. The cost of funerals in recent years has increased considerably higher than general inflation. No provider guarantees to cover all burial funeral costs in full, including that of buying the burial plot, but it’s important to understand what is and what isn’t guaranteed.
3. “Hopefully, a funeral plan will not be needed until many years after it is taken out and over the long term, of course, commercial companies, such as funeral plan providers, can grow or decline. Therefore, it’s crucial to make sure the money you have paid in is maintained securely. It’s important to check with the provider that the money in your plan is placed in either a trust fund or insurance policy so that it is held completely independently of both the provider and funeral director. Make sure you ask the funeral plan provider where the money you pay will be kept before taking out the plan; you could even look at a copy of the Trust's Annual Report, which should be available on request.
4. “It’s also worth finding out what will happen if the Funeral Director you select isn’t around at the time the funeral is needed; for example if they retire or cease trading. Make sure you understand whether the guarantee would still be honoured in these circumstances and whether there could be any further costs to pay. This is also relevant if you think you might move home and want your funeral plan to move with you to a new funeral director.”
5. “Don’t forget to compare the costs of different providers. This isn’t always as easy as it sounds but it’s important to consider any costs that the contributions specified will not cover. For example a plan which only provides a contribution to third party costs cannot easily be compared to one which guarantees them. In general, the fewer the guarantees, the more the next of kin are likely to have to pay at the time of the funeral. This will give you a good understanding of the value of each plan. And just as importantly, make sure you can afford the plan. If paying by monthly instalments it’s important to ask if they are over a fixed period or continuous payments for life. Continuous payments for life may look cheaper on the surface, but if you factor in how much you could pay in over your life time you could end up paying more in than will ever be got back.
6. “Check that the funeral plan you are considering is an actual pre-paid funeral plan. Of course, there are other ways to pay for a funeral, such as from savings or the value of an estate. But there are also some other financial products that are sometimes described as funeral plans, for example in their advertising, but which are not as defined in law***. For example, whole-of-life insurance policies are often sold as “over 50s plans”, “50+ plans” OR even “funeral plans.” These are designed to provide funds towards the cost of the funeral when required, but they may or may not contain any arrangements for the conduct of the funeral and rarely guarantee to cover all of the costs. It is very important to make sure that any such product pays out at least as much as is paid in.”
* Funeral Planning Authority statistics
** Statement by Ronnie Wayte of Golden Charter who states that average funeral costs today “are £3,600 and… over the next decade they will almost double in price to £6,700”, Mail on Sunday, 22 May 2016
*** Articles 59 & 60 of The Financial Services & Markets Act 2000 (Regulated Activities) Order 2001
The Age UK Funeral Plan is provided in association with Dignity, one of the UK’s leading providers of Funeral Plans. An Age UK Funeral Plan is a great way of planning and paying for a funeral in advance. They are designed specifically for those in later life with a choice of plans and flexible easy payment options to suit different requirements. They can also help people in reaching decisions about the type of service they would like and other elements of their preferred funeral.