Funeral Savings v. Funeral Plan – which is the better investment?
Funeral savings don’t work because Funeral Price Inflation is consistently high. According to the Guardian, funeral costs have gone up by 48% over 3 years. This is a rate of increase which is unlikely ever to be matched by a normal deposit account. Or any other sort!
Funeral savings by way of deposit accounts are guaranteed against bankruptcy if you have modest savings in a particular institution. They are also pretty much guaranteed to drop further behind in buying power each and every year. Unless you are shrewd enough to have your savings in one of the top 5 best paying accounts each year. Even then, funeral inflation has been much higher than general inflation for many years (almost three times higher, so you actually need to beat inflation handsomely – which no deposit account will, consistently. Just a few deposit accounts do manage to keep up with inflation, but normally they drop further behind as they attract more and more investment. It’s a classic case of a sprat to catch a mackerel with high interest rates offered initially.
Money is attracted in, the interest rate goes down, and few people bother to move the money again. Sneaky, but very cost effective – for them! So your funeral savings steadily drop in real value, as the cost of your funeral escalates. You can of course go for higher risk
investments which may have a better chance of keeping up with funeral cost inflation – or making a big loss of course! We think funeral plans are a much more secure way to save for the inevitable.
The best Prepaid Funeral Plans have your funds protected by a special audited and controlled Trust. This means that if your preferred Funeral Director goes bankrupt, your money is unaffected as it was in the Trust Fund, not his bank account. For this reason we prefer larger schemes over which control should be tighter.
Generally, prepaid Funeral Plans guarantee all or specific parts of the costs of the funeral will be met at the full future price. Some matters are outside the control of funeral directors – for example, Crematorium or Ministers Fees, and these costs generally have some specific amount set aside for them which is indexed.
So in general terms, a prepaid funeral plan will guarantee the cost of a basic funeral, and make an indexed contribution towards other costs. So the bulk of the expenses should be well covered.
With a deposit account, the amount set aside will reduce in value pretty much every year and the gap between the amount saved and the cost of the funeral will rise every year.
It seems to us to make sense to transfer money from low interest taxable funeral savings to a Funeral Plan with inflation protection. Save money, stress and argument at
an awful time by pre-planning. Let our team can find the appropriate plan for you.
The main reason for choosing Funeral Plans or Funeral Savings Savings.
Actually, there are two main reasons – apart from inflation to go for a Funeral Plan not Savings.
- The money may get spent!
- The deposit account may not be accessible to pay for the funeral until probate is granted. Many banks will release money early for this purpose, but it cannot be guaranteed, and if there isn’t enough……
- With a Funeral Plan, the hassle for those left behind is at an absolute minimum. It demonstrates that you cared enough to make it easy.
- Should you wish, you can dictate precisely how you wish your funeral to be carried out to avoid the traditional family quarrels over who knows best! Even down to the hymns and who should attend. We don’t recommend banning people though!
- Most funeral savings are taxable, so the interest rate is further reduced below inflation.
Funeral Savings or Funeral Plan – our summary.
For our money, pre paid funeral plans knock savings into a cocked hat! Click the link to go to download our prepaid funeral questionnaire.
From the Guardian 8th May 2010
“Funeral costs jump almost 50%
• Funeral costs rise by up to 48% in three years, survey finds
• Poor hit hardest as social fund payment does not cover costs”
From the Telegraph 10 Nov 2008
“With cremation costs on the rise, put to rest the fears about your funeral
Nobody wants to think about their funeral, but with costs on the rise getting a plan can work out cheaper and is kinder to relatives.
Councils are reported to have increased the price of cremation to offset higher gas bills. For example, Harlow Council in Essex has increased the fee for the service from £357 to £430, arguing that its gas bills have risen by 35 per cent.
“Funeral costs have increased by far more than the rate of inflation over the last 25 years,” says Paul Dwyer, a consultant who researches funeral costs. “Coffins, services and the cost of plots have all gone up, so it does make sense for people to make financial provision for their funeral sooner rather than later.”
The price of a modest funeral rose 10pc to £2,390 in the 12 months to September 2007, according to the most recent research Mintel has carried out on the subject. In 2007, the cost of a cremation, which accounts for 72 per cent of all funerals, was £2,160, while a burial costs £2,620. The research company has estimated that funeral costs will rise by a further 38pc by 2012.”
From the Independent 4th March 1993
“Funeral costs rise above inflation
A survey of funeral costs found that they have outstripped inflation for the second year running, rising by an average of 15 per cent this year, after a 20 per cent rise in in 1992. The average basic burial costs pounds 754, compared with pounds 656 last year and pounds 548 in 1991.”