How do Funeral Plans Work?
In the UK, Funeral Plans are well protected by rules which require that your money is put into a special fund where it is ring fenced until it eventually comes out to pay the undertaker. There are more problems with how plans are described than anything else! How can a funeral plan that doesn’t pay for a funeral be sold as a funeral plan? Why do costs vary so widely? Why is nearly everyone in the market just selling ONE firms plans? Why do you need us – to cut through all the jargon, get a price guarantee and the right plan for you. But that is enough advertising…..
How do Funeral Plans Work: How is your money safeguarded?
There have been odd cases where small local firms (usually funeral directors) have not been aware of the rules and have just put the cash into a client account. That is not at all the same thing. The proper precautions are to have a fund run by trustees who are independent of the funeral plan company. The company will normally be represented among the trustees, but would never have the ability to outvote the independent trustees who are there to safeguard YOU money. At the end of the day, your funeral plan works as long as the money is safe and it is prudently invested to keep up with inflation without taking unnecessary risks.
Some funeral plan providers chose to invest the money through an insurance company, They of course are very heavily regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
How do Funeral Plans Work: set up expenses.
When your payment goes to the Funeral Plan Provider, they take a proportion out to cover the initial expenses. The rest goes into the special fund which pays out the cost of the funerals as agreed in the original documentation.
A word of warning: never make the cheque payable to the intermediary (like us), always make sure the money can only be paid into the bank account of the funeral plan provider itself, or you will have no protection. It is a simple precaution but essential. Personally, I would always pay by cheque as that gives a clear audit trail.
How do Funeral Plans Work: Funeral Plan “Regulation.”
At this time there is no formal regulation of funeral plan companies apart from that above, though the Funeral Planning Authority (which is actually a members club, not a regulator) does give some useful input. But non membership is perhaps more to do with cost and doing things differently than not being “unregulated” as its’ members would say! Some of us who have experienced the dead hand of regulation stifling product development and making everything “plain vanilla” hope that, because the market for funeral plans works really well already, formal regulation won’t happen.