goes the headline. The implication of the article is that insurance funeral plans are poor value and you would be better off saving in a building society.
Funeral Plan Quotes
There is certainly an element of truth in that. The problem is that if you save £10 a month for 2 years plus a day, and then die, you would have saved £240 with a few pence interest. That won’t even buy the casket! If you had bought a “bad value” insurance based plan, you would have created a payout of around £2,000 which might pay for a basic funeral if you shop around. Well, if your relatives shop around!
So insurance funeral plans are good value if you die early (but not too early, or there will just be a refund of premiums paid.) However, if we use the example published in the Mail (page 47 on 16th May 2012) of buying the insurance at age 64 and dying 26 years later, you would have paid in around £3,12o.
What would you get back? According to the article Axa Sun Life Over 50 plan would pay out less than half that amount! Foresters, Aviva, Asda, Tesco, Legal and General, and Sainsburys are even worse. Top payer would be CUNA Mutual followed by Shepherds Friendly and Engage Mutuals Funeral Plans.
When you bear in mind that your savings would have earned some interest too, the benefits of the life insurance element of insurance funeral plans have to be pretty high to make them good value.
Here at the PrePaid Funeral Review, we rarely recommend insurance based funeral plans except in very rare circumstance (and we’re not giving away trade secrets on the site!)
However, they do have a place. They are just massively oversold and massively misunderstood – I would argue that their sales pitch is rather misleading because the public just don’t take the trouble to really understand what they are buying! According to the Daily Mail, nearly half a million people bought these plans last year. We reckon that more than half of then should have bought a proper prepaid Funeral Plan – and perhaps there are a million who still should still cut their losses and buy a full funeral plan. Click the link to enquire! But don’t expect anything back from the old insurance based plan.
“Michael Parkinson’s caring voice-over makes Axa Sun Life Over 50 Plan seem simple, yet for many it’s a seriously bad bet.”
I think we have sounded warning over this type of plan elsewhere on the site, but I suspect Martin Lewis’ opinion may carry more weight than ours!
Funeral Plan Quotes
It isn’t that the plan is intrinsically bad – just that it doesn’t really do the job for which people buy it. But most people don’t take the trouble we do to research the market and read the small print. They just fall for the headlines and nice words!
To find out which funeral plan would be most right for you rather than the Axa Sun Life Over 50 plan, click the link. Our job is to find out what your requirements are and then find the plan which provides the best value in your circumstances.
Whilst we wouldn’t agree with Which? if they imply that a cash ISA is better for pre-paying funeral plans, we certainly agree with them that over 50 plans aren’t ideal. The problem with an ISA is that it is subject to Inheritance Tax and Probate, so it won’t be availble when it is needed to pay for the funeral. But I don’t think that is what Which? is intending to say. Here is their story:
Over 50 plans* could leave pensioners thousands of pounds out of pocket, and the payout often falls well short of what they’d earn in a cash Isa, according to new research from Which?
The consumer champion found that on average, a 60-year-old man paying £15 a month into an over-50s plan for 30 years would earn a lump sum of just £2,980**. This compares to a cash Isa (4% AER) which would earn more than triple the amount over the same time (£10,313).
If a customer stops payments then they forfeit any payout or even the return of their premiums***. This means that they’re forced to keep paying money into the plan each month until they’re 90. For instance, a 60-year-old man with a monthly premium of £15 would pay a total of £5,400 by the time he reached 90. However, in some cases he could receive a payout of less than half that amount (£2,650). So the longer you live, the worse value over-50s plans become.
Even worse, if inflation was to follow the same patterns over the next 25 years as it has done over the past quarter of a century, by January 2037 the real value of a plan paying out £3,450 could be less than half this in today’s money.
Which? chief executive, Peter Vicary-Smith, says:
“For most people, over-50s plans are incredibly bad value. They’re inflexible and, for the majority of customers, they will pay out far less than you have paid in. For those that are looking to leave their family a cash sum, our advice is to steer well clear of these plans, and to put your money into a cash Isa instead.”
*Over 50 plans are intended for anyone aged 50 to 85 who doesn’t have a life insurance policy or provision for a payout when they die. They tend to be aimed at people who are less wealthy, who often find it difficult to meet the monthly premiums. Customers pay a monthly premium from the age they take out the policy until they die, or until the age of 90. In return, their family receives a payout of a fixed amount (determined at the outset) when they die, provided that they’ve contributed to the plan for at least one or two years, depending on the provider.
One advantage of over 50 plans is that no medical questions are asked. This could make them worth considering for customers with a serious medical condition who cannot take out conventional life insurance.
**Quotes obtained in October 2011
Over 50 Plans
PROVIDER LUMP SUM 4% CASH ISA OUTPERFORMS LUMP SUM BY YEAR SHEPHERDS FRIENDLY £3,450 15
ENGAGE MUTUAL £3,366 14
FAMILY INVESTMENT £3,288 14
RIAS £3,281 14
SAGA £3,139 14
SUN LIFE DIRECT (AXA) £3,020 13
TESCO £2,942 13
AA £2,940 13
ASDA £2,890 13
LEGAL & GENERAL £2,879 13
SAINSBURY’S £2,879 13
SKIPTON BS £2,879 13
LV= £2,815 13
STANDARD LIFE £2,815 13
AVIVA £2,712 12
POST OFFICE £2,712 12
NATIONWIDE BS £2,650 12 average £2,980 13
***Based on providers’ terms and conditions and an online quote
End of life time bomb – a press release from Sun Life.
Sun Life Direct, the expert in the cost of dying(*1), is calling on the industry to address the ‘end of life time bomb’ identified in its 2011 Annual Cost of Dying Report.
Funeral Plan Quotes
In the UK today, the cost of dying (including death-related costs such as funerals, probate, headstones and flowers) has increased to an average of £7,248, representing a dramatic increase of 20% since 2007, and over £400 more than last year. Discretionary funeral costs have increased 6.7% from an average of £1,746 in 2010 to £1,864 in 2011. Estate planning costs have reached a record high at £2,292. This represents a rise of 4.2% rise from 2010. However, the largest contributing factor to the cost of dying is non-discretionary funeral costs, which have risen by 8.2% since 2010. The report also reveals that this increase in costs has been met with surprise and concern from those who have responsibility for such arrangements(*3).
A quarter of those surveyed had not made any end of life plans. Sun Life Direct’s research not only highlights confused attitudes around end of life planning but also feeds into a broader concern; that society is facing three interrelated later life issues. Firstly, the UK’s ageing baby-boomers means the volume of elderly people living longer will result in a progressive surge in demand on the state over the coming decades. Secondly, this and other recent reports (Dilnot (*4)) highlights that the population faces rising end of life costs and blurred ideas as to who is responsible. Thirdly, the Sun Life Direct Cost of Dying research shows that many people do not provide and plan for the end of their lives. This includes the organisation of, and payment for, funerals and estate administration as well as the preparation of legal documents such as wills andLasting Power of Attorney’s and finally end of life care.
The problem is compounded by the fact that state provisions are not adequate. Only 38,000 awards (7% of all deaths in the UK) were made by the Department for Work and Pensions administered Social Fund Funeral Payments Scheme in 2010/11, worth £46.2 million in total (*5) and averaging £1,217 per applicant. A further 34,000 applicants to the Scheme were unsuccessful (*6). Additionally, the shortfall between average payout received and average funeral cost is substantial, and looks set to continue to grow (*7).
Simon Cox, head of life planning for Sun Life Direct, comments.
“This is a call to the industry. We need to help educate the UK public and especially those on lower incomes who may struggle to meet funeral costs. More information on why some people are so reluctant to take a firm grip on this matter would, we believe, benefit the general public as well as government and policy makers. For this reason we are considering further research into this area.
“With economic pressures both constraining rises to the Social Fund Funeral Scheme as well as fuelling a rise in funeral prices, we expect the situation to continue to be a growing problem. Significant reform is needed by public, commercial and voluntary sectors to ensure we help people properly plan for their deaths and the inevitable strain it will have on their family’s wallets. We have already started to engage with the Government and other agencies regarding this debate and hope others will follow.”
Dr Kate Woodthorpe, lecturer in Sociology, University of Bath, concludes:
“A key concern for society is whether the current infrastructure established to support people at the end of their life is fit for purpose today. Currently, the number of deaths each year in England and Wales is at an all time low, with 491,348 deaths registered in 2009. It is anticipated however that the number of deaths will rise significantly and by 2030 there will be an additional 80,000 people dying a year. (*8) This equates to a rise of 17% in the death rate in less than 20 years.
“At the same time, people are living longer and as a result are using more resources, both their own and the State’s. Costs for social care are rising living standard expectations are high, and there remains an expectation that wealth is passed through the generations. The relationship between the public, commercial and voluntary sectors in the resourcing and provision of care, information, advice, support and services in old age and in planning for death is open to debate.”
The complete report expands on the following findings:
• This year’s headline figures and key changes from last year.
• The extent to which end of life planning takes place.
• Barriers to planning.
• Confused and contradictory attitudes towards the role of families, the State and ourselves in relation to planning.
• Who we turn to for advice and support on end of life matters.
• Suggestions on how the end of life time bomb might be defused.
*1 Researching funeral and end of life costs for eight and five years respectively
*2 Discretionary costs are where consumers can choose if and how much they want to spend: death and funeral notices, flowers, order sheets, limousines, catering for the wake, venue hire for the wake and memorial (headstone). Non-discretionary costs are those incurred to a varying degree for every death: Funeral Director’s costs, Doctor’s fees for certification, fees for a religious or secular service and burial or cremation fees.
*3 53% of respondents said the funeral cost was more than they expected, up from 36% in 2009 – only 7% said the cost was lower than anticipated
Finding a lost funeral plan after death is not straightforward. Much better to get the ducks in a row earlier, as actions you take after death just could invalidate an otherwise perfectly good plan. But if you are looking at this, it is could be too late. There is a downloadable PDF version of this guide at the foot of the page on how to trace a funeral plan..
Instructing a funeral director yourself could invalidate plan benefits, so checking earlier is MUCH better.
Typically, the aged parent has said that they have a plan, but no one has pinned them down as to what it was – or they just can’t remember. So where to find the funeral plan?
Here is what to do to find details of that elusive lost funeral plan, ideally in advance:
If you have immediate access, check through the paperwork for a funeral plan (or more likely for older people, an insurance policy).
If immediately available, check bank statements for payments to funeral plan or insurance companies. For funeral plans, payment may have been in one go, many years ago. For insurance policies, the older type pre-regulation policies may have been made paid up with a value, so payments could have stopped decades ago. For the awful post-regulation policies often with no cash value, a policy may well be valueless if it is a non-profit whole of life, and a few missed payments mean everything is lost. But still worth asking.
To find funeral plans, the only central point to check is the Funeral Planning Authority, but not all funeral plan companies are members. However, you could cross-check against their members and the list of companies we review. They are the main port of call to find funeral plans which are “prepaid” – but they could still have been paid in instalments.
Also at the same time, check for lost insurance policies (etc) on the Unclaimed Assets Register https://www.uar.co.uk/ or ring 0333 000 0182 – you may even turn up some other assets! The biggest seller of Over 50’s Plans is Axa Sun Life on 0800 008 6060 though there are dozens of others as over 500,000 a year take out these insurances (why, we do not know: See our review.) They will trace a plan if it is an insurance one.
How to avoid having a lost Funeral Plan:
Make sure your family knows about your plan, whether it be a proper prepaid plan or a life insurance policy, and how to claim on it as doing the wrong thing may invalidate it.
Ensure both you and your family fully understand what is paid for and what is not covered. We never cease to be amazed by the number of people buying plans over the phone without seeing the full terms and conditions.
Always have the paperwork with other important documents in a designated folder that the family can find easily.
Never pay for a funeral plan in cash as there is less of a record of payment.
When moving house, tell your funeral plan provider. The cost may vary in the new area with some plans.