Category Archives: paying for your funeral

paying for your funeral

Response to Funeral Plan Regulation

Response to Funeral Plan Regulation from Stephen Pett of the Funeral Plan Advice Service Ltd info@prepaidfuneralreview.co.uk 01323 740844 2 Hankham Street Hankham Pevensey BN24 5BG

Why Not The FCA?

The worst sector in the market is the non profit guaranteed over 50s plan, which are by far and away the leading providers of so called funeral plans in the market.  As they are already regulated by the FCA and are the main source of consumer detriment in the market*, it makes little sense to allow the FCA to regulate the rest of the market when they have such a poor record of protecting consumers.

In general terms, the FCAs main claims to fame in the consumer market are:

  • Decimating the supply of advice (not just independent advice) in the market to such an extent that they have had to promote non-commercial services to “guide” rather than advise the public who can no longer get advice. Well over 90% of advisers have left the market since 1988, in a wildly more complex era when advice is ever more important.
  • Introducing and promoting Compo Culture to the detriment of public confidence in the industry.
  • Failing totally to lead from the front in terms of ensuring that risk warnings are accurate and consumers understand fully what they are getting when the regulator itself does not.
  • Introducing the new type of multi tied adviser who are neither independent nor tied, just to add to public confusion.
  • Making it very expensive and time consuming to be an advice giver with no certainty that the Financial Ombudsman Service will not decide in 30 years time that the good advice given today was (now) faulty, and getting you thrown out of your care home.

I am sure the FCA do a superb job in high level regulation, but their regulation of the consumer market has done very little to benefit anyone other than it’s many directors and the new industry of claims companies they have generated.

That said, there is a real need for stronger regulation, the key areas being:

  • Regulation of Sales Practices – with consumers often no being aware of terms and conditions before they sign up, and firms relying on their new clients lack of motivation to read the terms and conditions of what they have purchased in time to cancel. The key facts should be clear and simple to understand, and issued BEFORE sale.
  • Clarity on the financial situation of providers, and on their ability to take money out of Trust Funds for expenses or creating millionaires quickly. This should most certainly be reformed so that it becomes possible to compare trust or insurance funds in value and loophole terms.
  • We believe that independent advice should be encouraged, and the chances are that the FCA will take a purist approach and insist that this can only be done by charging fees, rather than a pragmatic approach to allow consumers to get advice from advisers comparing the overwhelming majority of companies who are happy to pay commission. No harm in stopping competition through commission rather than quality of product though!

From a personal point of view, I would expect FCA Regulation to drive us out of business as one of the very few intermediaries trying to offer independent advice, but history makes it clear that regulatory ease is more important than consumer detriment.

Questions

Who offers the guarantees?

Why are so many funeral plan providers £1 or £100 companies?

Why are providers so secretive about their funds and deeds?

  • Should the FCA Regulate the Industry?

I do not believe that the FCA is a competent regulator of public facing services, is far too bureaucratic and expensive.   It currently has no serious understanding of the market, and past experience shows that it regulated from the rear – after things have gone wrong – rather than from the front where it would need to PREVENT things going wrong, requiring some understanding of products.  It just is not their mindset: the PPI issue was common knowledge in 1988 and it took the FCA 20+ years to address it in a wildly inefficient way which created a new industry and compo culture.  All that was needed was to make the PROVIDERS sort it out, so they paid for it rather than the public losing 25% to Claims Management Companies and the industry paying millions for needless highly negative TV campaigns rather have the FCA force the culprits to sort it out.  Common sense is not a strong driver at the FCA.

  • Should advisers be allowed to act as ARs for specific providers?

Should If you just want salespeople, this makes sense, but it is a sector of the market that the FCA has pretty much wiped out in insurance intermediation, and one can only assume their were reasons for this which might apply equally to the funeral plan market. In our case, though we are a small business, that would be unrealistic as we are independent and we would probably, as so many IFAs were, be driven out of business by the regulatory burden.

  • Should Designated Professional Bodies be allowed to exempt firms from regulation?

I have no idea whom the author feels are potential DPBs but the only ones who I can think of who have any understanding of funeral plans are the Society of Will Writers and the Institute of Professional Will Writers.

  • Bespoke Plans

Intermediaries job is to help the consumer get what they want in terms of a plan, but the authority for each plan comes from the funeral plan provider, not the intermediary, unless that intermediary is the funeral director.

  • Should FOS be involved?

You would think so, in that the feedback loop between them and the FCA would improve the market. Sadly, FOS prides itself on having staff who don’t understand the market, and the FCA only wishes to lead from the rear.   A more positive approach to both regulation and market improvement is required, which I believe could be developed far more quickly and cost effectively by the FPA.

  • Near death plans. I believe we may have sold one, and these plans can create major savings. The exemption appears to us to defy logic.
  • See above.
  • Territorial scope. Many funeral plans are sold which may be used in the UK or abroad, and this exemption could potentially allow offshore companies scope to get round any form of regulation by selling plans which could potentially be used in the UK.
  • Statutory Instrument This will achieve the objective if it is to stultify the industry.
  • Impact Assessment Clearly whoever wrote the impact assessment is unfamiliar with FCA pay scales, the amount of paperwork they generate and the amount of work needed to comply with regulations when you are asked the simplest of questions. Extra costs at the FCA with be an absolute minimum of £1m a year, allowing for 1 senior and 5 other staff and expenses, and extra costs for the industry will be a minimum of 10 times that, probably nearer 50. In fact I imagine first year costs at the FCA would be several millions, rising each year. No reference has been made to the difficulty in innovating under a regime which regulates only the past and prides itself on compo after the event rather than prevention before.
  • Books in surplus – clearly, if the contracts are sensible, not a problem.
  • Books in loss – if there are any, the first port of call should be the former owners who may well have milked them
  • Unable to be authorised. Some may not have the staff or finance to cope with the demands of FCA regulation and the consequent need to lay aside funds for future compo claims.

 

 

 

 

 

 

 

 

*Over 50s Plans are non- profit whole of life plans which NEVER have any cash value, except at point of death.  At any other time, if the client misses a couple of premiums, they lose every penny.  It would be interesting to request what proportion of these plans pay out, and I would be surprised if more than one third do.   The rest will predominantly getting back what they have paid in or far less. The FCA sometimes deny regulating these plans, but as they can only be sold by regulated firms, that is a little daft.

Are Prepaid Funeral Plans A Good Idea?

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

What to wear at a funeral

what to wear at a funeralDeciding what to wear at a funeral without guidance from the family can be difficult. Wearing formal suits and ties and dark dresses used to be the order if the day. But no more. Now it is about celebrating life and Mintel found seven in ten (68%) over 50s like the idea of a funeral being a celebration of life rather than an “old style” ceremony. That rose to 76% of women aged 50 to 64.

Nearly two thirds over 50 would prefer to discuss what sort of funeral they would like. Only around one fifth don’t want to talk about it at all, and we have developed a tool for them to quietly express their views, should they wish too.

One of the biggest benefits of talking about your own funeral is avoiding the issues which very often arise with different family members having different opinions. At stressful times, these conflicts can split a family forever, which is no the legacy most people would wish for.
Whether you opt to provide financially for your funeral, or just think it is a good idea to make your wishes known to avoid uncertainty, please do get in touch.
As such, perhaps it is unsurprising that the funeral market has been resilient through the downturn despite the declining mortality rate, rising by 38.5% between 2009 and 2014, or by just under 7% a year in that time. The funeral market in 2014 is estimated to be worth just over £2 billion, up from £1.5 billion in 2009 with the average cost of a basic UK funeral in 2014 stood at £3,609. Strangely, a prepaid funeral plan can cost less than a funeral, due to the the plan providers buying power.

Showing that most Brits are not averse to planning for their farewell, less than two in five (17%) UK adults aged over 50 admit they haven’t taken any steps to prepare for their funeral. Furthermore, over a quarter (26%) have put four or more steps in place. In addition, almost one in six (16%) have a written set of funeral arrangements in place.
When it comes to paying for their funeral, half (49%) of Brits over 50 say think that all or part of the cost of their funeral will be met from the value of their estate and three in 10 (30%) say they have savings set aside specifically to cover their funeral. In a lot of cases, that money may not be available for months – until a Grant of Probate has been obtained. The family will, of course, have to pay or enter a loan agreement before the funeral can take place. Additionally, over a quarter (28%) have a whole-of-life insurance plan that they think will cover their future funeral costs, though many holders of Over 50s insurance (or their families) will be sadly disappointed. Please to read the article on these products if you or a family member have one: there are ways of making the situation more secure.

Since Mintel wrote their original article in 2014, the number of people investing in prepaid funeral plans has soared, though only a tiny proportion has realised that free independent advice (from us) is available, and maybe another plan would have been a better deal. But any proper prepaid funeral plan is far better than none.   Strangely, the biggest resistance to prepaid plans comes from the people who stand to benefit most from them – the children. It is they who don’t want to face the fact that their parents are not immortal!

Pre-paid funeral plans are the only sensible way of putting money aside for your funeral, but there are many options and benefits which some plans have and others don’t. So the salesman will do a great job of selling his or her own plan, but won’t know much about the benefits of the other plans in the market – which is why our free Independent Advice is so important.

So, what should you wear at a funeral?

Ideally, you should fit in with the plans of the deceased, but (again, ideally) the funeral invitation or notice should give you an idea.  If in doubt it is probably best to be cautious and stick to dark clothes – you can’t go too far wrong with that!

Funeral Plan Concerns Grow (but it isn’t all bad)..

Funeral Plan Concerns Grow with the wider choice of plans…

Which Funeral Plan?

Funeral plan choices

Funeral plans are great – as long as you understand what you are buying!   None of the following plans are bad plans, they are just unsuitable for most people!  All of this shows why you need our independent advice and should not rely on a company sales pitch.  And you should never sign up without reading the small print. That is where the disadvantages of some funeral plans are hidden, and with the wide range of funeral plan choices, you need help…

Sadly many people don’t take the trouble to read the small print.  Here are some common issues that people miss when they buy a plan:

 

  • The plan isn’t a funeral plan at all, it is a life insurance which has no value if you stop paying it.
  • Some plans only cover the Funeral Directors fees with nothing towards the third party costs such as the crematorium.  That alone can be £995 if it is a Dignity one (as at August 2017). These costs are typically around a third of the total.  Again, no problem, and much better than nothing as long as the family know.  The allowances in prepaid plans range from £500 to around £1,200.  In most cases, that is linked to inflation.
  • You’ve bought a Direct Cremation plan, so you will be whisked away and cremated perhaps hundreds of miles away with no chance for the family to see you, or attend the service.  These are the plan of choice for some people, but do the people who would wish to attend the service know, or are they going to be shocked and upset?
  • There is a new breed of cut cut down plan which typically saves you £400 but could result in your funeral being anything up to 50 miles away at 9.30 in the morning.  Not wildly convenient for family and friends!  We think they are a marketing gimmick and very rarely best advice. Typically the saving is accomplished by giving you no influence over choice of undertaker or the location of the cremation.  These plans are usually only for cremation.
  • Burial Plans – in our experience – NEVER include the cost of the burial plot, and not all family plots are able to accept further family members.  Burial plots can vary from a  few hundred pounds to many, many thousands.
  • Please do not treat a funeral plan as if it was a savings plan.

Many of the plans we advise on are very flexible, and you can change the plan by adding limousines, or changing from a direct cremation plan to a standard plan – as long as it is done in time.

For a more detailed look at the types of funeral plans available, have a look at this article.  But if you just want straightforward advice, give us a call or use the form to the right.

Paying For Your Funeral In Advance: What Are The Pitfalls?

Paying for your Funeral yourself.

Sorting out the cost of your own funeral in advance has many advantages:

  • The family don’t get a large bill which typically has to be paid within 48 hours, before the funeral can go ahead.
  • There is less for them to fall out over, as you have made the arrangements.
  • The funeral has less chance of guilt-tripping the family into spending more money than they need to or can afford.
  • With funeral cost inflation running at around 6%, and savings earning less than 1%, a prepaid funeral plan is a good investment for the family.
  • It is one less  (major) problem for others to sort out.

Paying for your funeral in advance is a great benefit for those left behind.

paying for your own funeralBut it gives you the peace of mind that you have done the best that you can.  Other pages on this site explore the types of plans and the types of plans to avoid.  But if you would like a free no obligation discussion and independent advice, give the Prepaid Funeral Review Research team a call on 0800 0588 240 or use the enquiry form to the right to ask for more information or a call.

One thing which has caused problems in the past is people paying the funeral director in advance.  If they have the necessary Trust

fund

or another formal scheme in place, that is fine.  Many funeral directors are tied to Dignity or Golden Charter, for example, who have all the required protections in place.  Others may not understand the rules and could put your money (and their freedom!) at risk by not doing things properly. It is very rare for this to happen in the UK but it must be better to talk to us before making a decision.

You can pay for your own funeral in one go, or you can break the cost up into monthly payments spread over anything up to 30 years.  Interest-free instalments are available over 1, 2 or 3 years with top prepaid funeral plan providers.  The bigger the deposit you put down, the lower the payments each month, but some firms accept no deposit plans.   But we only recommend monthly payments where clients are sure they can manage the payments every month.  At least with a proper prepaid funeral plan, you won’t lose every penny if you are late with a couple of payments.

Paying for your funeral: what is covered?

Prepaid funeral plans are NOT all the same, which is why our independent advice is so important.   A typical plan will pay the undertaker, who currently charges around two-thirds of the cost of a typical cremation.  Then there is an allowance towards third party costs – things the undertaker pays for on your behalf.  the basic ones are the crematorium fees, the doctors’ fees and the cost for a minister or celebrant to run the service.

But some plans will only cover the funeral directors fees, leaving your family with an increasingly large bill to pay as the years pass by. Best avoided, unless both you and your family understand the situation, as are cheap cut down plans.  We can run through the options, there is no obligation.