The shocking truth about funeral plans!


Jan 26, 2016
The shocking truth about funeral plans!

Funeral plans are a simple and easy to understand financial product that buys you a funeral ready for when the time comes. Unlike insurance products that replace a lost item or provide a cash sum in the event of death, funeral plans provide a set of services that will be carried out for an event that is guaranteed to happen - you just don't know when. 

 

Paying for your funeral in advance makes good sense, financially and emotionally for your family, but the shocking truth is that most people don't pre-arrange their funeral and often leaving the family to pick up the bill and second guess what type of funeral you would have wanted. 

You probably didn't or wouldn't allow your family to arrange your wedding, so why leave it to them to arrange something that is much more stressful? 

The second shocking truth, is that funerals aren't cheap and that funeral inflation has been rising at over 6% a year since 1980, that's way above retail price inflation (RPI). In 2004 the average cost of a funeral was £1,920 and today it's £3,702 and should it continue at this rate they will cost nearly £6,500 in just 10 years time. 

Also shocking is that many people are confused between what is a prepaid funeral plan and over 50 life insurance. In simple terms with a funeral plan you are buying your funeral services at today's prices avoiding inflation and putting in place the funeral that you want. 

An over 50 life insurance plan could help pay for your funeral, but will only provide a cash sum upon your death. So your family will need to arrange your funeral and of course the cash sum could be worth less in real terms as inflation will have eroded it's true value. 

Shocking truth number 4, funeral plans are not regulated by the Financial Conduct Authority (FCA) but by the Funeral Planning Authority (FPA), the industry's regulatory body. 

The government's Money Advice Service recommends that you seek a funeral plan provider that is regulated by the FPA as this will give you additional reassurance that your money is safe. 

Typically when you purchase a plan your money is invested in a trust fund that is independently managed and audited by a firm of accountants, being a member of the FPA means that the trust fund is audited and subject to an annual actuarial review to ensure that there is sufficient funds to pay for all the funerals that are held. 

Shocking fact number 5 is that some funeral plan providers do not tell you who your funeral director will be, but will allocate to a funeral director at the time of your death. Surely with something as important as your funeral you will want to know who will be carrying it out? 

Always ask who the funeral director will be or ask if you can nominate one if you would like a specific director. Please note that Coop funeral plans can only be used with Coop Funeral Directors, Dignity have their own branded funeral directors plus use a network of independents. Golden Charter has a network of over 3,300 independent local funeral directors to choose from and the other plan providers will either have a selection geographically or use some local directors. 

Take care to read the small print should your nominated funeral director not be available when the time comes. When you choose to pay monthly for your funeral plan make sure that you are also aware of the total amount you will repay over your chosen term of years. Shockingly this isn't that clear when you pay monthly from some sources. 

When you pay for your funeral plan over a period greater than 12 months you will be charged interest or administration fees for the privilege and as a general rule the longer the period the more you will pay back.  

And for our final shocking truth, make sure that you know what the plan includes, as not all plans are the same! 

Most plan providers offer 3 levels of service, but some providers offer a 4th which is an entry level plan, often referred to as a "Base Plan". The base plan will provide your funeral directors services only, which is fine provided you are that there are other costs that your family will need to pay. 

These costs are not optional as we will all have to be cremated or buried, often referred to as 3rd party costs or disbursements and typically include an allowance or guarantee for your cremation or burial fees, your ministers fees and some plans still provide for doctors fees, although this is likely to be no longer required in the next few years. 

Summary 

I hope this has helped you to know what to look out for when buying a funeral plan. You can also save money by shopping around, either directly with the funeral plan providers or through a comparison site like ours. There is money to be saved comparing between providers and also when you purchase from a broker like ourselves there may also be a discount and or cashbacks on offer.

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Ashley Shepherd is an Over 50s Personal Finance Expert

ashley shepherd

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