What is a prepaid funeral plan?
A prepaid funeral plan lets you arrange and pay for your funeral in advance. It allows you to choose and arrange the funeral service you want, and pay for it at today’s prices, removing some of the worry from family when the time comes.
But with a number of options available, understanding how a prepaid funeral plan works is key to making an informed decision on buying a funeral plan.
Is a prepaid funeral plan a good idea?
Whether it's a good idea to have a prepaid funeral plan will depend on your requirements, budget and the funeral planning company you choose. If you want to arrange and pay for your funeral in advance, have the money available and understand how your chosen plan works, then a prepaid funeral plan could be a good idea.
From 29th July 2022, the Funeral Planning Authority will be responsible for the regulation of funeral plans and the protection of consumers. Therefore it could also be a good idea to choose a plan that the FCA intends to approve.
How do prepaid funeral plans work?
A prepaid funeral plan lets you arrange and pay for your funeral in advance. You simply choose the type of funeral you want, pay at today’s prices, either with a one off payment or monthly instalments and the funeral director will take care of everything detailed in your plan when the time comes.
All prepaid funeral plans guarantee to cover the funeral director’s costs, so you will never have to pay a penny more for those services. This includes their help and guidance, a coffin, the hearse, limousines (depending on the plan you choose), use of the chapel of rest and their services on the day.
However, some prepaid funeral plans only include a contribution towards the third party costs, also known as disbursements. These include the cremation or burial costs, minister's fees and doctor’s fees if a second death certificate if required.
The contribution included in these types of prepaid funeral plans usually increases in value annually in line with either RPI or CPI. However, at the same time, these fees will also rise in price.
Which is why a prepaid funeral plan that also guarantees the cremation fees and ministers fees could be worth considering.
Are prepaid funeral plans safe?
The Financial Conduct Authority will be responsible for the regulation of prepaid funeral plans from 29th July 2022. From that date, all funeral plan providers must be FCA authorised.
Authorisation means the funeral plan provider has had to demonstrate they comply with the FCA’s rules and code of conduct, ensuring consumers are protected and their money is safe. It also means that consumers have access to the Financial Services Compensation Scheme should the plan provider become unable to provide the services detailed in the plan.
So to check your chosen funeral plan provider is safe and on the FCA’s list of ‘intended to authorise plan providers’, visit their website.
How much does a prepaid funeral plan cost?
The cost of a prepaid funeral plan ranges from £2,900 to £4,300 depending on the funeral services included.
- A premium paid funeral plan will usually include a superior coffin and two limousines
- A standard funeral plan with one car could cost in the region of £3,700
- A standard prepaid funeral plan with no car could cost in the eregion of £3,300
- A simple funeral plan with some restrictions, such as the time of the funeral service, could cost as little as £2,900.
What is the best way to prepay for your funeral?
The best way to prepay for your funeral will depend on which option works best for you. You can pay for a funeral plan in full or monthly and your money is held in a trust fund or life insurance policy. The cheapest way to pay is either by single payment, or over 12 months as most funeral plan providers won’t charge extra for this payment option. If you prefer to spread the cost then a monthly prepaid funeral plan may be a more suitable option.
What are the prepaid funeral plans pros and cons?
With approximately 1.4 million plans already purchased in the UK and demand increasing every year, being aware of the pros and cons of prepaid funeral plans is more important than ever.
Prepaid funeral plan PROS
- Save money by paying for your funeral at today's prices
- Remove the worry of making funeral arrangements from your family
- Choose the type of funeral you want
- If you move within the UK, the plan moves with you*
- Flexible payment options to choose from
- Reduces your liability for inheritance tax
*Depending on the plan provider you choose
Prepaid funeral plan CONS
- There may be additional funeral costs to pay for when the time comes
- Funeral plans aren't currently rgulated by the FCA, but will be from 29th July 2022
- Your money will be tied up
- You won’t be able to use your prepaid funeral plan if you move abroad (unless choose a European funeral plan)
Why plan your funeral in advance?
Planning and paying for your funeral in advance this way could be a wise decision for two reasons:
Funeral costs have risen
The average cost of a funeral in the UK is currently £4,056, a rise of over 100% since 2004. According to Sunlife's research, funeral costs could rise to over £5,000 by 2026. With a prepaid plan, your funeral services are fixed at today’s prices. This means you avoid future inflation and will never need to worry about rising funeral costs again.
Kind to your family
In addition to saving money, a simple prepaid funeral plan can be a huge relief for families as it means they won’t have the worry of arranging and paying for a funeral.
Instead, all the arrangements included in your plan will be made for them; all they will need to do is make one call and the funeral director will take care of everything.
What is funeral insurance?
Funeral insurance is a term frequently used to describe prepaid funeral plans. Whilst some plans hold your money safe in a life insurance policy until it is needed to pay for your chosen services, funeral insurance should not be confused with life insurance.
Whole of life insurance and over 50 life insurance plans offer an alternative solution for helping with funeral costs. Policies are designed to pay out a cash sum when you die that your family can use how they wish.
For more information on life insurance vs funeral plans, read our useful guide.
Why choose Simply Funeral Plans?
The team at Simply Funeral Plans is a bit geeky when it comes to prepaid funeral plans. With over 10 years experience, we are experts when it comes to routing out the details and helping our customers find the right funeral plans for them.
We believe you should have complete confidence in your prepaid funeral plan, knowing that when the time comes, it will provide the services as promised in the plan, with no nasty surprises and no hidden costs.
Quite simply, we want you to find a funeral plan you can trust.