Before we go on to look at the negative aspects of prepaid funeral plans, let us look at a real-life example which happened in 2019 to make it clear that they may well be a good idea, even if not for everyone.
A friends mother died, and they went to their usual undertaker and arranged a funeral. It was just a standard cremation with a ceremony at the crematorium, and it cost £4,790.
He happened to mention it to me, and out of curiosity, I did some research, and it turned out that a fully guaranteed plan using the same funeral director and with exactly the same services would have given a massive saving of £1,655.
So the expectation that prepaid funeral plans are NOT a good idea is not one which should be accepted as a fact. In this case, had the family come to us a couple of weeks before the death, we could have saved a lot of money for them. Incidentally, you can buy plans for friends or relatives and many providers allow you donate your own plan to a friend or relative.
Let’s get negative and examine the idea that funeral plans are poor value – it does happen.
Sometimes there is a new funeral director in town, offering exceptionally low rates to establish themselves in the area. It is certainly possible they might charge less than the cost of a prepaid plan, at least in the short term. In some cases, you could cancel the plan and get back most of the original cost, but they are about more than saving money. They are about simplicity, convenience, and avoiding disputes as the deceased made most of the arrangements
The Daily Mirror gives these reasons why funeral plans are bad value:
Funeral plans might seem like a good idea on paper – but they’re really not great value for money and are often high-pressure sold, which is why they’ve had some bad press lately. Here’s how the plans work:
- Funeral plans are designed to pay for the costs of your funeral. But there are lots of things that they don’t cover, commonly flowers, headstones – even the burial plot.
- You pay over instalments or in one lump sum payment. But there are costs for cancelling the policy and for paying by instalments and the policy doesn’t build up interest or insurance like an investment.
- Funeral plans are a bit like savings clubs – so they aren’t regulated financial products, so you’ve got less consumer protection, though there is a scheme to help if one goes bust.
We certainly agree that some salespeople are high pressure, which is why we have a discussion with clients and POST out a full recommendation with all the information for them to read and act on when they are ready.
Unsurprisingly, funeral plans cover what they say they do, not other things. Burial plots for example can cost £300 or £15,000 plus. Burial is a more complex transaction, with headstones not being able to be erected form 6 months plus, and being there for the family rather than the deceased. Again, even wider variations in cost can happen.
In terms of paying in installments, the extra costs are to provide some cover for the increasing costs over the years. For a £3000 plan, you would not expect to be able to pay £300 a year over ten years, as the cost of the actual funeral could have doubled in that time, so those who paid in one go would effectively be subsidising the installment payers.
The third point is sort of valid, but client money is either kept in a ring-fenced independently managed and audited fund or with an insurance company which is regulated. Full regulation is on the way, but is likely to be a double-edged weapon with choice and (our) independent advice becoming much more restricted.
Other disadvantages of prepaid funeral plans:
- Most plans have a cancellation charge to cover their costs. Whilst they do vary rather widely, it should be very unusual to need to cancel a prepaid funeral plan.
- If you do cancel, you won’t get back more than you put in. With the horrible over 50s non-profit plans, the only time you get anything back is when you die, provide the premiums are up to date.
- You don’t always get the funeral director you want, but then that one may have been sold long before you need the plans. Most firms are actually not small private firms anyway, they are shopfronts for the big boys.
- It is worth repeating, that a funeral plan cover only the services they say they do – if you want flowers, posh or wicker coffins, headstones etc you need to specifically ask for them.
- At the end of the day, never buy a prepaid funeral plan without reading ALL the small print! So call us on 0800 0588 240 or use the enquiry form.