When we die, the main worry is that there is not enough money to pay for our funeral, leaving the burden to fall to our loved ones. Statistics show that over 1.3 million people in the UK own prepaid funeral plans, and hundreds of thousands of us are locking-in the price of a funeral, each year.
We look into how these prepaid funeral plans work and if they’re worth it. And what steps you can take to eliminate the financial distress funeral planning can cause both to you now, and to your family after you die.
In this article
Why choose a prepaid funeral plan?
With the price of funerals rising a whopping 128% since 2004 the average price today of a basic funeral according to Sunlife’s recent report* is £4,184 – the highest it’s ever been. Quite a chunk of money whichever way you look at it and something regularly overlooked by thousands of us happily living one day to the next and enjoying life. Understandably, the topic of death and funeral planning is not an area that anyone wishes to dwell on for a considerable period. Sadly, this often-overlooked matter causes the most distress to the family members during what will already be a highly emotional time when a loved one passes away.
Nearly two-thirds of us haven’t discussed our wishes around dying.
Along with feeling uncomfortable to broach the subject, it’s true to say that many of us probably think that we’re too young to discuss dying. Most of us are of the mindset that death is hopefully a long way off. As time goes on, if this subject remains bottom of the ‘must-sort’ list, the likelihood of this task falling to a member of your family upon your departure from this world, is pretty high. Inevitably this will result in added financial burden on an already emotionally upsetting time. It also makes sense to have this discussion in happier times, so everyone is informed of your wishes and singing off the same hymn sheet so to speak!
How would it make you feel for your family to pick up the bill of your funeral arrangements?
Reassurance that the main bulk of the funeral costs are taken care of is a big reason why a funeral plan can make sense to those not wishing to leave this worry to their loved ones. Knowing that the arrangements can be taken care of with one quick phone call offers peace of mind when the time comes.
How do prepaid funeral plans work?
Simply put, you pay into a plan at a fixed amount, securing the price today. When the time comes, your loved ones can proceed with your wishes. Help and assistance are only a phone call away, setting the plan into motion.
There are numerous types of funeral services, but most fall under the following five categories:
A cremation service comprises the coffin entering the chapel by pallbearers and placed on a raised platform, while a religious or non-religious service is held prior to the cremation. This service accounts for over 75% of all funeral plans in the UK.
Burial services gather mourners in a short ceremony after the main funeral service, followed by the coffin being lowered into the ground.
Religious funerals allow families to celebrate the deceased’s life and include prayers, religious readings, and hymns, typically held in a church.
Woodland burials appeal to the environmentally-conscious or those who wish their relatives to see them off with a Green Funeral surrounded by nature. The Association of Natural Burial Grounds monitors these carefully selected woodland or orchard locations.
Direct cremations have increased exponentially in 2020, partly due to COVID-19 restrictions and also because this type of funeral offers an affordable alternative to a full funeral service. A simple coffin, doctor’s fees, medical papers and transportation of the body, can provide the utmost of care, but with the minimum fuss.
Alternative funerals encompass unconventional funeral transport modes, moving away from the standard limousines, or maybe a request for a colourful funeral service instead of the traditional sombre affair? Colourful coffins are also a popular request these days.
Are prepaid funeral plans regulated, and is my money safe?
Even though the Funeral industry is vast, the Financial Conduct Authority (FCA) have yet to regulate funeral companies. The question that most people ask is “are prepaid funeral plans safe?”. In answer to this question, we’d strongly advise you to ensure that you select a registered funeral plan provider. Check the Funeral Planning Authority (FPA) website where you will find a full list.
By signing up to this independent body, funeral plan providers agree to abide by the authority’s Code of Practice and safeguard the consumers’ monies paid to the Plan Provider. The funds placed in either a Life Insurance plan (by a company regulated to do so), or through a secure Trust Fund offers protection of the clients’ assets. Should the plan provider cease trading, then other providers registered with the FPA (signing up to an agreement), will step in and attempt to cover your service and funeral plan.
Will my funeral plan pay out if I die before it finishes?
Don’t omit this part of the planning, or it will cost your loved ones dearly!
It is crucial to look at the terms and conditions of the providers of all the funeral plans you receive a quote from as they vary enormously. Look for the companies that offer a guarantee that they will pay out on the plan even if you die before the end of the agreed term. For example, if you pass away after the first 12-months of paying into your agreed period, the Co-op Commitment promises that they will deliver all the services provided in the plan with all payments up to date. One of their Funeral Directors will carry these services at no extra cost to the family.
Are funeral plans worth it?
Let’s look at the prepaid funeral plans pros and cons to ascertain if funeral plans are a good idea?
Plan your funeral so that you can carrying on enjoying life
Eliminate the financial burden for family members through a prepaid plan
Know that your end-of-life wishes have been discussed and taken care of
Lock-in the cost of your funeral and protect against rising prices (especially if you live in an expensive area)
Reassurance that your family can activate your desires with one phone call
Flexible payment options
95% of plans regulated by the Funeral Planning Authority
Funeral plan contributions are not subject to inheritance tax and may not count towards care credit assessments
Some plans will payout even if you pass away before the end of the term agreed
Money is tied up
Won’t cover if you move, or are, abroad when you die
No cash-out value, the plan is purely in place to cover funerals
Doesn’t include a burial plot (although some plans contribute towards) or send-off costs
If you need a funeral shortly, then this maybe not for you
You may not have the choice of funeral time and date through a cheaper plan
If funerals decrease in price, you may end up paying more through a plan
How much does it cost when someone dies?
We’ve discussed that the basic funeral comes in currently at £4,184, but is this all there is to pay? Securing the rising cost of a funeral through today’s price can alleviate your family’s financial pressure after you pass, but will this be enough to cover all your celebration of life wishes?
Here is a simple sum based on Sunlife’s report on the cost of dying in 2021.
£4,184 (basic funeral cost)
£2,532 (send-off costs)
£2,547 (professional fees)
This total comes in at more than double the basic funeral cost, so let’s look at the usual cover provided in the basic funeral cost plan:
- Funeral Director
- Transportation of deceased to the Funeral Director’s location
So what funeral costs are extra?
The basic funeral costs are covered in the prepaid funeral plan, that we do know. If you’ve sat and thought about what kind of send-off you wish to have, you may have thought which song you would choose, or perhaps your preferred flowers to decorate the church? All of these send-off costs are extra and often include:
- Memorial, death and funeral notices
- Catering and venue for the wake
- Professional fees cost involved in hiring someone to deal with administering the estate
Not forgetting that the following costs are also extra
- Purchase of a headstone or grave
- The fee to return the ashes after a direct cremation
- Dr’s or Coroners’ fees
Maybe it’s time to sit down with your family and discuss what is important to you for your funeral arrangements. Many people don’t do this. The result of this is higher funeral costs and quite a lot of guesswork from family members of what they think their dearly departed may have wanted? (Often spending more than the deceased would have liked.)
Prepaid funeral plans cost, and cover explained
With more and more funeral plan providers entering the market with assorted product offerings, it is worth noting that all funeral plans online are not equal. They have in common the cost: ranging anywhere from £3,000-£5,000 depending on the type of funeral or cremation selected. The determined amount prepaid, either in one lump sum or by affordable monthly instalments over a period of up to 25 years, (although longer than 12 months will typically incur interest).
Now is the time to do a little research on the various funeral providers out there to see how they measure up to your specific requirements.
The industry is expanding every year. As there will always be a need for funeral services, it is even more likely to see evermore companies entering the market with different product portfolios. Some consumers may focus on the price point and eliminate what they deem as superfluous costs. In contrast, others will see personal communication and service as more valuable, knowing this will help loved ones through this incredibly challenging period.
For example, Dignity Funerals offer prepaid funeral plans from £3,095, but their most popular selling plan currently costs £3,850. If paid monthly, it equates to less than £4 extra a month. It offers a lot more including a limousine and funeral procession to a service location, then onwards to the burial site or crematory. Many funeral plan companies don’t cover the actual burial costs (plot and Minister’s fees). Dignity makes a generous contribution of £1,220 towards this, which increases annually in line with the Retail Price Index (RPI).
How else can I pay for a funeral plan?
A prepaid funeral plan is one way in which to secure your wishes after you die, but let’s examine the other ways in which you can pay for this event.
Life Insurance operates by the policy holder paying a monthly amount towards a lump sum to be paid out upon death. The older you are when you initiate the policy, the higher the premiums will be. Something to be aware of is that if you die within the first two years, then your premiums will be returned, and no lump sum offered. Will this cover the necessary funeral costs? Life insurance is precisely that – insurance that pays out upon your death. It will not consider your end-of-life wishes, so your family will need to be advised of these to make the necessary arrangements. Over 50s life insurance’s primary function is not to cover funeral costs. So it’s vital to regularly check the average cost of a funeral over the years, against the lump sum you expect to be paid out on after you die to save any unexpected deficit.
If you’ve left a will, then the monies can come from your estate. While the funds are typically accessible for funeral arrangements before probate, the necessary documents are requested, including the funeral director’s costs. How long this will take will depend on the banks and executor of the will. It is also worth looking into Inheritance Tax and what effect this may have on your provisions.
A savings account offers the most flexibility with regards to how much you wish to put away. You can also stop paying in as and when you would need to, throughout your life. The disadvantage of a savings account is keeping ahead of inflation, especially with the current low-interest rate. You may see these denominators’ effect further down the line with the rising cost of a funeral in comparison to the amount saved.
Which funeral plans offer the best cover and value for money, and what should my funeral plan cover?
Funeral plans are not for everyone. One funeral provider may offer the most cost-effective plan. At the same time, another may tick all the boxes of how you see your end-of-life celebration. With this in mind, it’s imperative to think about the crucial points you wish to be covered before you begin scrolling aimlessly through pages of funeral plan websites. It can be a minefield, and you’ll end up wasting time and energy if you’re not clear about your requirements.
We’re often asked, “What should I look for in a funeral plan?”. We’ve compiled a step-by-step list of questions to answer before you begin shopping around for a quote. Be very clear about what you want and what you don’t like, and the rest will become straightforward.
Don’t be a victim to a good salesperson. Stay informed!
We’ve compiled these five necessary steps of funeral planning.
Download our in-depth Funeral Planning Checklist to complete and keep safe to assist you when receiving those quotes for a prepaid funeral plan.
- Decide on the type of disposition – burial, cremation, green burial, alternative.
- Find out nearest location of woodland, or meaningful place to scatter ashes.
- Do you want a service? – traditional, graveside or cemetery, memorial, scattering ceremony.
- Decide whether this will be religious or non-religious, choosing any readings you wish to have at the service.
- How could you pay for the funeral? – savings, investments, credit card, one lump sum or in instalments via a prepaid funeral plan.
Are cremations cheaper than burials?
2020 saw massive restrictions on how funerals were able to be held, due to COVID-19. The number of direct cremations rose significantly. Has this had a permanent effect on the way that we view our end-of-life ceremonies?
According to Sunlife’s Cost of Dying Report 2021, lower costs and COVID-19 Government regulations restricting the traditional funeral arrangements, people are noticing the big divide between the average price of a direct cremation (£1,554) and a burial (£5,033).
In 2020, 74% of funerals were cremations. Of these, from February to July – direct cremations counted for 25% of cremations taking place. (Up from just 3% in 2019.)*All data and figures on funeral price increases from sunlife.co.uk/costofdying2021
More and more people are becoming aware of what a Direct Cremation is – where the deceased is transported straight to the crematorium and cremated. The pandemic has been instrumental in forcing this. There is no service and no mourners; therefore, no further costs for flowers, or limousines, to name a few. Once in possession of the ashes, the family can then decide how to celebrate their loved one’s life. Many prefer to do this either because their loved one wasn’t religious or wouldn’t have wished the expense of a religious funeral service.
Let’s talk about flexibility!
Ok, so you think you want to proceed with a funeral plan. You’ve noted your wishes, decided what to include, exclude; what’s important to you and what you don’t mind omitting from the plan. All looks good so far – but what about flexibility with your funeral plan? Suppose the price is the most significant factor for you? In this case, you may find a funeral provider who will offer a cost-effective prepaid funeral plan to meet your wishes.
More often than not, these plans will not allow you to change the way they work at any time during the agreed term. For example, if you move to a different UK location halfway through paying for your funeral plan, will the funeral provider accept the new area on your existing plan’s terms? Again, depending on the cover chosen, you may have access to more or possibly less of a choice of funeral directors in the new location. Another location-based question to ask is “will my funeral plan cover me if I die away from home?” If you are abroad there will be additional costs, but what about if you are more than the 50-mile transportation limit that some funeral plan providers include?
Ask all of these questions when you are shopping around for a quote as an affordable monthly payment that is entirely inflexible could prove a waste of time. In contrast, a more personalised plan with a slightly higher monthly payment could cover all your (changing) needs.
Another simple but sometimes overlooked detail is whether you have informed your family that you have purchased a prepaid funeral plan? You’d be surprised how many families omit to mention this detail during their lives, resulting in the deceased’s family proceeding with independent funeral arrangements at a cost to themselves. The funeral plan company is not obliged to refund any of the monies paid – so be sure to let them know if you take outprepaid funeral plans!
Did you know that over 50% of men over 50 haven’t discussed their funeral arrangements, and women top the list for purchasing funeral plans for the over 50s?According to OnePoll surveying 1,000 men and women over 50
This statistic shouldn’t appear too surprising when you consider that most mothers have a birth plan when bringing babies into the world. Most brides are responsible for planning their wedding arrangements. Women may view the end of life arrangements as another life plan. In contrast, men are more likely to address these arrangements when deciding to make a will? A prepaid plan could make financial sense in this instance.
With a liberal amount of funeral plan providers offering an extensive selection of plans to suit every budget, the whole process of deciding which one to plump for can feel hugely overwhelming. As this is a purchase not to be taken lightly, how do you know whom to choose?
As with every industry, there are always the big names that readily come to mind. The same is true for the funeral plan providers. Here are 8 of the more familiar funeral plan companies that you will have probably heard of:
- Age UK
- Safe Hands
- Silver Clouds
- Pure Cremation
Prepaid funeral plan reviews
Would you go on holiday without checking out the reviews on your hotel? – no, that would be taking a gamble that you might not get the type of holiday that you planned, right? So, before you part with your hard-earned money, make sure your first step is to check out that the funeral plan company provides what they say they will.
Read the reviews and testimonials left by customers’ families. Trust Pilot is an independent review platform where consumers can leave reviews, both favourable and not so encouraging so that you can see how the company performs. Search the internet and see what is being said online about the funeral plan company. Have they won any awards, how long have they been in the industry? Defaqto is another noteworthy icon to see on a website – they analyse financial products rating them on a scale from 1 to 5. A little homework at the start may save you a big headache after you’ve handed over your money.
Prepaid funeral plans quote
The next step is to get a few quotes for the cover you need. Once you’ve answered the five funeral planning steps and downloaded the Funeral Planning Checklist, you will have a clearer idea of how your end-of-life celebration looks. Now to choose which plan?
Currently, there are 27 funeral plan providers registered with the Financial Planning Authority. It is worth shopping around to get the most cost-effective plan with the benefits that suit your wishes. While the larger operators may offer the best deal, a smaller, more personal company may offer a better one-one service for your family, when the times comes.
Some funeral plan providers offer joint funeral plans paid monthly for those who cannot afford two individual plans. These plans will naturally only payout on whoever passes first – a significant benefit if a family member dies unexpectedly. If financial circumstances change in the interim, you can begin paying for the second plan.
This FREE download and Guide to Funeral Planning Checklist in 8 Easy Steps gives you expert tools to stay one step ahead and see if a prepaid funeral plan would work for you.
Armed with the information in this article and free downloads, you’ll have gained insight into planning a funeral, and various ways of paying for the costs. You’ll have comprehensive knowledge of how funeral arrangements work, and how to go about documenting your wishes. We have also scoured the UK funeral providers for the best-prepaid funeral plans currently on the market so that you don’t have to!
Don’t become a victim of unscrupulous providers and avoid the pitfalls of saving for your funeral costs. No one likes to think about dying, but having this conversation now and planning for the future will alleviate the financial burden on those left behind. Your peace of mind, knowing that your family members will be ok financially, will afford you hopefully many worry-free years to come.