How to Multiply Cash ISA Returns

With pathetic returns on cash ISA investments affecting millions of investors, many look around for a better alternative.  And that is not easy without taking substantially higher risks – just the thing that older folk (like me!) don’t want.

Some recent PR by Dignity pointed out what the comparative returns of investing in an ISA and buying a boring but essential funeral plan. The “tax-free” easy access cash ISA has averaged around 2% but is now just 1.3%.  Funeral Plans don’t really offer access, but they have returned, over the same period since 2011, around 5.45%.   The difference is extra money for your family in savings on funeral costs – not to mention the advantage of simplicity and the fact that YOU have made the arrangements, so there is little for the family to quarrel about (and they all know what you would have wanted, and they are all certain that it isn’t what everyone else thinks).

Someone is going to be stuck with the bill for your funeral, and it will be a lot cheaper and more straightforward if you sort it out in advance.  Just don’t think that all plans are the same – all sorts of (in our opinion) sneaky tricks are used to sell plans which are funeral plans – but leave out vital parts.  Some don’t pay for the funeral at all!!

That is why we exist, to offer sound independent advice. We do not send round well-trained salespeople to sit in your living room until you agree that their product is best (when it is far from best.)  So why not have a chat, work out what you want and how you want to pay for it, and we will send you a written recommendation to consider?

Apparently, over 200,000 funeral plans are sold each year now: we recommend that you use us to BUY the right plan and not just buying from a salesman.

An independent report by Fairer Finance concluded that, because they lock into the cost of a funeral at the time of purchase, funeral plans can offer a good financial investment

So while in 2017 the average funeral cost £4,086, if that price continues to increase at the same rate that it has for the last seven years, then it will reach £5,924 by 2024 according to the Dignity Funeral Cost Calculator.   This suggests that anyone investing that money in an ISA today could be left £1,171 short for the average funeral by 2024, because if they were to put their money into a Funeral Plan, they would be covered.

“The Fairer Finance report acknowledged that while Funeral Plans represent good value for money, a lack of regulation and consumer protection in the industry means consumers should do their research to avoid getting stung says the article in Global Banking And Finance Review. Research is the key word of course, and it is something we do every day, but we fear that very, very few of the 200,000 buyers will have done any significant research and nearly all won’t fully understand the options – so call us on CLOSED

  •  Find a safe provider which protects your money.

All UK based plans SHOULD be either invested in a regulated insurance company OR have an independent Trust Fund which is regularly checked by highly qualified Actuaries to make sure that the funds match the requirements to pay for the funerals.

Membership of the Funeral Planning Authority is not greatly significant yet, as they have only recently changed from being a providers Club to offering a form of independent Regulation.  This means that many companies have seen no need to suffer the extra costs of Regulation, but we always encourage them to join – but it is neither easy nor cheap, so you can understand their reluctance to join an unproven Regulator voluntarily.

  • Read through the fine print.

We always send our recommendations out in writing, together with the full Terms and Conditions of Business of the firm we recommend.  Some firms sell over the phone in the hope that you won’t cancel the plan when you see the Ts & Cs – and as most people never read them, they are on safe ground.

  • Will the Plan move with me?

Not all plans are flexible – some will allow you even to move abroad, never mind a hundred miles or so which could put you outside the area some very small firms cover.

  • Costs

Clearly an important issue – some companies have MUCH higher cancellation charges than others. The difference in cost for essentially identical plans can easily reach £1,000.

Low-cost funeral plans with no service can be right for some but you certainly need to read the small print really carefully and check that you have understood it – even we have trouble with some.

  • Interest Free

instalments are available commonly for 1 year, but some will offer 2 or even 3 years.  If you need to pay over a longer period the extra costs will have a substantial impact on monthly payments.

We recommend avoiding Over50s insurance plans if at all possible.

  • Other Features

Some firms will allow a single plan for a couple, and the first to die uses the plan, leaving the second funeral to be paid out of the estate when it is less financially crippling.

Other firms will allow you to donate your plan in the event of a friend or family member being unable to afford a funeral.   This can be especially useful if a younger person dies leaving dependents both grieving and facing a big bill with reduced income to pay it from.

  •  Sharing your final wishes

All providers will allow you to document how you would like to have your funeral conducted, including music, type of service, dress etc.

If you would like a copy of our Final Wishes document (even if you can’t afford a funeral plan) just use the form to the right and ask for it.

In summary Cash ISAs have some benefits and should not be discounted entirely – the right one is great for savings you are likely to need access to.  But prepaid funeral plans are MUCH better than cash ISAs for that portion of your savings intended for your funeral.