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who pay funeral costs uk

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 WARNINGS – This is Where Things Go Wrong

Prepaid Funeral Plan Warnings.

We feel that many people are buying funeral plans which they expect to cover things which they never set out to do. So we have compiled a list of things you might expect to be covered, but might well not be.  It makes good reading while you are considering the right funeral plan company for you, and whether you need any extras.

This page is a little random, but well worth reading, so please do read on.

Courage in the face of Funeral Plan Competition.

We at The Prepaid Funeral Review are pleased to advise that one of the major funeral plan firms has decided to stop selling the cut-down plans we have long campaigned against.  Who really wants a plan where you have no choice over the time or place of the funeral?  We could never recommend them. If you have bought one we would suggest you contact the provider and see if they will upgrade you to a normal plan – typically £300 to £400 more.

Funeral Plan WARNING: during our regular prepaid funeral plan reviews this January, we discovered one firm whose prices appeared to have gone down quite considerably.  On the face of it, they had suddenly become a “best buy.” But when we looked really carefully, we realised that they had just dropped all contributions to third-party costs.  It was NOT clearly pointed out that the family would have to pay the crematorium, the doctors fees and the minister or celebrant! Those costs represent roughly one-third of the total bill, which would make this provider rather expensive.  Those folk who think that all plans are pretty much the same could be in for a shock!

Funeral Plan WARNING: watch out for Over 50s plans which are based on non-profit whole of life policies (most of them).  With most, miss a few payments and you lose every penny. You will also be asked to increase your payments regularly so as to keep up with funeral cost inflation, and with many of them, you will probably pay in more than you get back. Stick to proper pre-paid funeral plans if you possibly can.

Funeral Plan WARNING: Some people do buy plans which cover only the Funeral Directors fees, and none of the third party costs which typically make up 30 to 40% of the final cost of a funeral.  No problem with that at all, as long as both you and the family are aware of it. Covering most of the costs is way better than none!

Funeral Plan WARNING: The Beginning of the End for Cut Down Plans?

These plans are offered by most providers and folk who haven’t really understood the Terms and Conditions will sometimes leave behind shocked and upset mourners. PLEASE AVOID – tens of thousands are buying these plans without our professional advice: don’t joint them! The key is where and when the funeral takes place is taken totally out of the control of the family.  Worst case could be 50 miles away at 8.30 in the morning.

Worse still, the crematorium owners are finding increased demand for out of normal hours funeral, so they are putting up their prices!  Some crematoriums are already causing problems with their high cremation fees, which already exceed the total third-party costs allowed by some prepaid funeral plans. They are using their muscle to try to disrupt the market to their own advantage, and push their already considerable profit margins ever higher on the back of high prices to third parties.

Funeral Plan WARNING:  Direct Cremation plans are relatively inexpensive.  Just be sure that your family realise that you will be whisked away and they will have no chance to say goodbye with you there. At the moment, one plan does allow for family viewings (only) but at extra cost.

Funeral Plan WARNING: never buy a funeral plan unless you have read ALL of the Terms and Conditions and brochure.

What is usually NOT included in a funeral plan?

As independent advisers on prepaid funeral plans, we see the market becoming much more complicated. Fine if you understand it all, but not so good if you don’t. That is why you need to speak to us!