Funeral plans and over 50s plans

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.

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.

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buy a plan from a provider if its status is, 'not applying for authorisation', 'application refused' or 'application withdrawn’.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:

• Contact the provider in writing and make sure you keep all records of your communication with them.
• If the provider is a member of the Funeral Planning Authority (Opens in a new window), contact them for support.

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

• Check their FCA status here (Opens in a new window) If their status says “no application submitted yet” there is a risk they will miss the deadline to continue as a funeral plan business.

• make sure you only buy plans from companies that are part of the FPA. You can check their list of members on the FPA website (Opens in a new window)
  

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.

• 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?

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.

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 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.

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.

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.

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.