Rising Cost of Funerals – why are funeral costs increasing?
This is an extract from a report on the rising costs of funerals from the International Longevity Centre. We could interpret the results as buy your funeral plan now as prices are going to keep rising substantially! But on with the report extract:
In recent years, the major increases in funeral spending have been on essential costs.
The answer to rising funeral costs is, or course, prepaid funeral plans.
Rising Funeral Costs – Cremation Fees.
Cremation costs rose 51% between 2007 and 2013.
Cremation price rises are partly down to changes in government legislation and partly due to rising energy prices. Mercury is toxic, causing damage to the brain, kidneys, nervous system and unborn children, yet despite this mercury is also found in tooth fillings. When individuals with mercury fillings are cremated the dangerous mercury is released in to the atmosphere.
As a result in 2005 legislation was introduced which meant that by 2012 50% of crematoria had to be fitted with special filters to reduce the mercury emissions generated when tooth fillings are incinerated. Newly opening crematoria must also be fitted with mercury abatement systems. However, such systems can be costly and in 2006 the Federation of Cremation and Burial Authorities predicted that the improvements in mercury abatement would add between £25 and £30 on to the cost of a funeral by cremation.
Cremation costs have been driven up further by increasing energy bills. Cremation uses roughly 285 kilowatt hours of gas and 15 kilowatt hours of electricity on average per cremation 18 and energy prices have consistently risen in recent years. Indeed between 2007 and 2013 electricity prices went up by 12.6% and gas prices rose by 31.1%. But that is just part of the explanation for rising funeral costs….
2015 Simple funeral Price Tag: £3,590
Included: Burial or cremation, the costs of a funeral director, a minister or celebrant. The rising cost of funerals has doubled this cost in just a few years. (So contact us to save the rising cost of funerals!)
2015 The Full Works funeral Price Tag: £5,423
Included: Burial or cremation, the costs of a funeral director, a minister or celebrant, a memorial, death and funeral notices, flowers, limousines, a venue and catering for the wake.
Rising Cost of Funerals: Burial Costs
Burial expenses rose 69% between 2007 and 2013 and 1 in 5 Funeral Directors surveyed in 2013 agreed that a lack of burial space was an important factor in rising funeral prices.
Indeed back in 2006 the Ministry of Justice found that 12% of Church of England burial grounds in England and Wales were only open to burials in existing graves while 19% were closed to burials. The same survey found that 12% of Local Authority burial grounds were only open to burials in existing graves and 11% were closed to burials.
With such a shortage of burial space it is unsurprising that burial costs have risen.
Rising Costs of a Funeral Director.
Between 2008 and 2013 increases in the costs of hiring a Funeral Director were well above inflation, with prices rising by more than 5% a year for much of the period. One possible reason for this is as funeral costs become increasingly unaffordable funeral directors have to take on bad debts from clients who are unable to pay. Such debts then have to be passed on to other clients via price increases.
Rising Church Costs
The fees for a Church of England official at a funeral rose by 58% from £102 to £160 in 2013. However in Scotland there are no compulsory church fees and people are simply recommended to give a donation. In 2013 this donation was £71 on average. Minister’s costs are also lower in Northern Ireland, around £50 in 2013, and in Wales, £70.
Will the increase in the number of deaths lead to further rises in funeral costs?
Whether we see a continuing increase in funeral prices as a result of the projected increase in the number of deaths will largely depend on whether funeral directors, crematoria and burial sites can keep up with a large increase in demand.
Burial and cremation preferences
Demand for burial or cremation will largely be determined by individuals’ preferences. A poll carried out on behalf of Engage Mutual in 2012 found that 51% said they would like to be cremated and 19% said they would like to be buried, while 30% of people were unsure of their preferences upon death. UK burial preferences have changed over time. In 1960 less than 40% of bodies were cremated yet by 2013 this figure had risen to 75%. The level of cremation has plateaued over the past decade and is unlikely to rise too far above its current level.
In 2013, 25% of bodies, close to 133,500, were buried. If the proportion of bodies being buried remains at this level by 2030 there will be demand for over 143,200 burial spaces, an increase in demand of 16.9%25. It seems likely the current burial system, where an individual typically has the rights to their burial space for 75-99 years, will struggle to meet this level of demand. A survey by the BBC in 2013 reviewed the responses of 358 local authorities (out of a total of 699 approached) in England and Wales and found that 44% said they had 20 years or less burial space remaining. 25% said they could run out of burial space in a decade. Moreover 20 local authorities reported that they could run out burial space in less than 10 years.
Given the pressures on burial space it seems likely that burial costs will continue to rise as the number of deaths increase.
While cremation rates have increased significantly over the last 50 years so has the number of crematoria. The increase in cremation prices in recent years cannot be explained by excess demand.
Number of Crematoria and Cremations.
The rises in cremation costs as a result of the introduction of environmental legislation on mercury emissions are likely to be a one off. However, cremation costs could continue to increase if energy prices rise further. While energy prices have fallen in recent months, in the medium to long term it is likely that energy costs will begin to rise again. Indeed projections by the Department for Energy and Climate Change forecast a rise in gas prices in 2015 and 2016, and a rise in oil prices from 2018 onwards.
The cost of a Funeral Director
Funeral Directors are not highly regulated and providers range from small family run businesses to large chains. In theory the industry should be able to expand its capacity to meet the increases in demand and there are few major barriers to new entrants. However, the recent rises in the fees have not been caused by excess demand but by the financial difficulties experienced by customers. Bad debts passed on to Funeral Directors by customers who cannot afford to pay will represent a bigger problem to Funeral Directors if burial and cremation costs continue to rise and their fees may increase further.
The bottom line on funeral costs
With an increase in deaths projected, already limited burial space, stagnant growth in real household incomes and future energy prices uncertain, funeral costs are likely to continue growing. As a result, the cost of bad debt to funeral directors is also likely to increase and costs could be further compounded. Furthermore with local government budgets being continually squeezed, over 80% of councils say they will increase the charges for their services in the next year. This could mean even more rises to cremation and burial costs. The above analysis indicates that funeral costs have not yet peaked and we are likely to see further rises in coming years.
Projecting future funeral costs.
Looking forward, if funeral costs continue to rise at the pace seen in the last decade, by 2024 the cost of a simple funeral will have almost doubled to £6,713. Even if costs simply rise in line with average prices, based on the levels of CPI inflation seen over the past 10 years, the cost of a simple funeral will still rise to £4,672 by 2024. It is also possible to project the likely future costs of a full funeral, which would include any discretionary costs. However as discretionary costs fluctuate year on year, and people may choose to spend less on discretionary extras as the cost of a simple funeral rises, this is more difficult. Indeed in 2014, discretionary spending was actually lower than it was in 2007 (£1,833 compared to £2,027). Below we have assumed that people will spend £1,955 on discretionary costs, which was the average spent between 2008 and 2014. We then look at how inflation and changes in the price of the simple components of a funeral are likely to impact on the total price of a funeral. If full funeral costs simply rise in line with inflation, then they are likely to be around £7,200 by 2024. However if the price rises seen in the past decade continue, in another ten years’ time, the total cost of a full funeral could reach nearly £8,700.
Comment from Will Eccleston: “”Nice article. Funerals have recently risen by just under 7% year on year, one would assume that this will level out very soon but continue to rise at around 4% going forward. I was wondering why some funeral plan companies have increased their prices by circa 12%. Seems disproportional to us at NFFD and hope that there is legitimate reasoning for this. We suggest the FPA should set an annual price increase limit so as to not raise costs above that which is absolutely necessary.”