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Funeral plans and over 50s plans

How safe is money in a funeral plan?

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Funeral plans aren’t currently regulated. From 29 July 2022, all funeral plans will be regulated. Any funeral plan providers or intermediaries which are not authorised by this date will not be able to sell new plans or fulfil previous plans sold.

If you’re planning to buy a new plan, check the FCA provider list (Opens in a new window). If the firm status says “no application submitted yet” there is a risk they will miss the deadline to continue as a funeral plan business.

If you have a plan and your provider hasn’t applied for authorisation yet, or isn’t going to apply for authorisation, they should contact you to tell you what’s happening with your plan. If you haven’t heard from your provider, contact them.

For now, the industry relies on a voluntary regulator called the Funeral Planning Authority (FPA). They don’t offer the same level of protection for customers as a government regulator, but they do have a set of standards their members have to follow. They also state that they will help to resolve customer complaints. Beware that some funeral plan providers are not members of the FPA.

Your money will either be invested in a trust fund with trustees, or in an insurance policy, which is then used to pay for the funeral.

Why use a funeral plan?

Many people worry that when they die, they won’t leave enough money for their funeral and their loved ones will be left with the bill.

With a funeral plan, you arrange and pay for it in advance, so your relatives don’t have to cover all the cost themselves.

You can arrange a funeral plan for your own funeral or for someone else’s, as long as it’s held in the UK.

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Funeral plans explained

With a standard funeral plan, you pay for your funeral in advance, at today’s prices. You can pay the plan provider in either a lump sum or instalments. You can buy a plan from most funeral directors.

Funeral plans vary in terms of what’s included. All plans include the services of a funeral director who takes care of the deceased, arranges the funeral and organises transport.

But there are differences with the extra services that plans offer. Some might provide high-quality coffins, access to view the deceased in a chapel of rest, and limousines to transport guests to the funeral. While other plans might be more basic and just cover the cost of your burial or cremation.

As well as the main costs of the funeral director and coffin, funeral plans might also include – or make a provision for – third-party costs. These can include the cost of using a crematorium, doctors’ fees and the cost of a minster or celebrant. These third-party costs are usually called ‘disbursements’.

Cremation funeral plan

If you’re buying a cremation funeral plan, it won’t usually cover the cost of disbursements in full.

Instead, they’re covered by an allowance, which rises in line with inflation.

But there’s a risk that if funeral costs rise faster than inflation, there won’t be quite enough money in your plan to cover these costs. This would leave your family or estate with extra to pay when you die.

Some funeral plans offer a guarantee to cover all third-party costs.

Burial funeral plan

If you’re opting for a burial funeral plan, it will usually include the cost of digging the grave. But the cost of the burial plot – as well as extras such as headstones – won’t be included.

Funeral plans never include the cost of flowers or organising a wake. But some plans allow you to put aside some extra money to cover these costs.

It’s important to make sure you know what your plan does and doesn’t provide before you pay.

What protection do I have if I buy a funeral plan before 29 July 2022?

If you’re thinking of buying a prepaid funeral plan before the FCA starts to regulate funeral plan providers on 29 July 2022, don’t buy a plan from a provider if its status is, 'not applying for authorisation', 'application refused' or 'application withdrawn’. 

It’s important to make sure you understand what your plan does and doesn’t provide for the cost, and whether there are extra charges.

Before 29 July 2022, you will not:

  • have access to the Financial Ombudsman Service if you want to make a complaint against a funeral plan provider, or
  • have access to the financial protection offered by the Financial Services Compensation Scheme (the FSCS). This means, if the company goes bust, you might not get all of your money back.

If a funeral plan provider stops trading or doesn’t get authorised or you wish to complain about them, you have two options:

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If you’re buying a funeral plan before 29 July 2022:

What will change if I buy a funeral plan after 29 July 2022?

You should only buy a prepaid funeral plan from a provider regulated by the FCA after 29 July 2022. You can find a list of approved providers on the FCA website (Opens in a new window)

These providers will have to follow certain rules which includes making sure:

  • you get the plan you’ve paid for at a fair price, and that it meets your needs 

  • your money is looked after and used responsibly 

  • you get the information you need to make an informed decision before buying a plan

If you have a complaint about one of these providers, you will also be able to take it to the Financial Ombudsman Service (FOS).

If you bought a funeral plan before 29 July 2022, you will be able to take a complaint to the Financial Ombudsman service after 29 July 2022 as long as the provider was a member of the FPA at the time the issue you are complaining about happened.

If one of these regulated providers goes bust, you will be able to claim compensation for your financial loss from the Financial Services Compensation Scheme.

How to pay for your funeral plan

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If you’re paying for your funeral plan in a lump sum, you could consider paying for part of it on your credit card.

When you pay with your credit card, you can get extra protection if things go wrong with the funeral director. You could also get this protection if you were to pay at least £100 on your credit card, and then pay the rest in instalments.

If you die before you’ve finished paying the instalments, your family or estate will need to pay the balance. Some plans offer to pay the remaining instalments through a form of insurance.

Pros of funeral plans
  • They give you the chance to make the arrangements that you want for your funeral.

  • They might protect you against rising costs.

Cons of funeral plans
  • They can be expensive. The average funeral using a funeral director costs £3,837.  Even if you’re paying in instalments, that’s likely to cost you at least £20 a month.

  • If funeral prices fall, you could end up overpaying for your funeral.

  • Some plans don’t guarantee all the costs.

  • Funeral plans aren’t currently regulated.

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Questions to ask the funeral plan provider

  • Have you applied to the FCA for authorisation (Opens in a new window)?
  • Are there any cancellation charges?
  • What exactly is included in the plan and what potential costs aren’t?
  • Could there be any other expenses for the funeral, and what happens if there are?
  • Is it possible to cancel the plan if circumstances change – for example if you’ve arranged for your spouse’s funeral but you later separate?
  • Does the plan allow you to choose the funeral director?
  • What if your chosen funeral director goes out of business?
  • What happens if the person the funeral is intended for dies abroad or away from home?
  • Can the funeral director arrange a funeral of a different standard from the one you’ve chosen?
  • If you pay by instalments, how long do you do this for and do you have to pay interest?
  • What happens if there are outstanding instalments when you die?
  • What freedom do you have to change the details of your funeral plan?
  • How does the funeral planning company know about the plan holder’s death?
  • Are you regulated by the Funeral Planning Authority to offer funeral plans?
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Are over 50s plans worth it?

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Over 50s plans are insurance policies that guarantee to pay out when you die. You pay a fixed amount every month for the rest of your life. In most cases, the payout doesn’t rise with inflation.

They can be poor value if you live a long life, especially if you take one out when you’re in your 50s – as you’ll end up paying in much more than you’ll get out. If you die within the first year of taking a plan out, you’ll also usually only get a refund of what you paid – rather than the agreed plan payout.

But because there’s no medical check when you take one out, if you’re in poor health, they might be a good option for you.

For most people, just reaching average life expectancy (currently 81 years) will make one of these plans bad value.

For example, say you take out an over 50s plan costing £20 a month when you’re 55. It guarantees to pay £5,000 when you die.

By the time you get to the age of 76 you’ll have paid in £5,040. For every year you live after that you’ll pay £240 for nothing. You can stop paying, but you’ll lose all the money you’ve paid in so far and get nothing when you die.

Pros of over 50s plans
  • They don’t need any medical underwriting. This means that being in poor health makes no difference to your payout.

  • You can pay as much as you can afford – unlike funeral plans where minimum premiums are much higher.

Cons of over 50s plans
  • In most cases, you lose your whole payout, and you won’t get any money back, if you stop paying in the first year. However, some providers are now offering payment holidays – to give you some breathing space if you’re struggling to keep up with payments. And some policies will still protect some of your payout if you stop paying after a certain number of years.

  • The payout on most plans doesn’t increase with inflation. This means many people end up paying more in premiums than their payout.

  • You usually need to survive beyond the first two years of an over 50s plan to get the full payout.

  • Some plans require you to continue paying premiums until you die. This means that if you reach average life expectancy, you could pay far more in premiums than you’ll get back.

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Alternatives to funeral plans and over 50s plans

Funeral plans and over 50s plans might seem tempting but can end up being expensive ways to plan for funeral and still leave your loved ones having to deal with unexpected expenses after you die.

Here’s some alternatives.

Putting money into a savings account

Putting a little money aside each month is one straightforward way to save for a funeral.

This isn’t risk-free though, as you might die before you build up enough to pay for a funeral. And many people worry that they might not have the discipline to leave their savings untouched.

But, it’s one way to guarantee a lump sum of money that will be available to put towards your funeral costs.

Most banks will release funds for funeral costs before probate and before inheritance tax is calculated. An itemised bill from a funeral director and copy of the death certificate is usually all that’s required.

Using the money you leave behind in your will

You might have assets that can be sold when you die, such as your house. You could make it clear in your will that you want these to be used to pay for your funeral.

But it can take some time for properties to be sold after someone dies. So it’s worth talking to the family member who you want to arrange your funeral and checking that they have enough to pay upfront.

Death in service from an employer

Some employers provide a payout if you die while you’re still working for them. Typically this is lump sum four times your annual salary paid to a nominated family member.

Additionally, if you’re a member of a trade union, professional body or other association, they might pay a benefit when a member dies. Contact them to find out.

Life insurance

Using the lump sum payment from a life insurance policy can pay for a funeral.

According to the Association of British Insurers, payments are generally made about a month after the policyholder dies. It could be longer if the death needs to be investigated.

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Bereavement support payment

If you or your spouse or civil partner dies or has died after 6 April 2017, you might be eligible for a Bereavement Support Payment. Both the living and dead partner must be (and have been) below state pension age, currently 66.

The payment is a lump sum of up to £3,500 plus 18 monthly payments of £350. 

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More information about funerals

The links below include more general information about funerals. For example, the different options available, choosing a funeral director, rights, choices, and help with costs.

The sources of information differ depending on where you live:

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