Beware of expensive pre-paid funeral plans

Pre-paid plans are more complicated than they should be

(Image credit: © Getty Images/iStockphoto)

Anyone who has ever organised a funeral can tell you it usually costs more than you would expect. The average funeral costs £9,263 according to SunLife, a life insurer, but the total outlay varies depending on your choices. Coffins don’t usually come cheap, while fancy flowers and a burial plot can all rapidly increase the price.

To avoid spiralling costs and save relatives the hassle of deciding the details, more and more of us are opting for a pre-paid funeral plan. You design and buy your funeral in advance, locking in today’s prices. But many people may not be getting the funeral they think they have paid for.

“This is a strange scenario: the purchaser is not around when the plan comes into effect, to assess whether it meets promised standards and complain if it doesn’t,” says Faith Glasgow in The Financial Times. People often don’t discuss their funeral plans with family so, after their death, their relatives don’t know what was agreed.

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“We are currently dealing with a prepaid funeral where there is a lot of misunderstanding over what was included. The customers are under the impression the whole funeral was paid for, but we had agreed with the plan provider that the plan would cover only part of the costs,” one funeral director told the Financial Times. That family is facing an additional bill of £700.

One problem is commission, with will writers and funeral directors being offered hefty payments by third-party funeral plan firms if they can sign people up. Commissions can sometimes make up 50% of the cost of a plan.

The Financial Conduct Authority (FCA), the City regulator, will be stepping in to authorise and regulate the pre-paid funeral plan industry from July 2022. It has now announced how it plans to make the sector more transparent and fairer. From next summer firms will have to be authorised by the FCA to sell funeral plans and that will mean meeting strict rules on how they market their products. They “will be banned from cold-calling and from using additional fees to drive profits and commission payments to intermediaries”, says Kevin Peachey on the BBC.

Peace of mind

An added benefit of pre-paid funeral plans being regulated by the FCA is that from next July your money will be protected by the Financial Services Compensation Scheme (FSCS). So, if the company goes bust you can get your money back.

In the meantime, if you have a funeral plan, or are planning to get one, make sure someone you know understands how much you’ve paid and exactly what that covers. That way they can ensure you get what you paid for after your death. Also check exactly how the cost of your plan breaks down. How much are you paying for your funeral? How much will go on fees and commission?

“Keep the paperwork with other important documents so it is easy for your family to find,” says Peachey. And if you move house, tell your funeral-plan provider. “The cost may be different in the area you move to.”

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Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.