Funeral plans and over 50s plans are two different ways of paying for part of a funeral in advance. Find out what to bear in mind if you’re thinking about taking one out.
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.
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.
How safe is money in a funeral plan?
Watch out
From 2022 funeral plans will be regulated, for more information regarding how this will affect you go to the FCA website
Your money must either be invested in a trust fund with trustees, or in an insurance policy, which is then used to pay for the funeral.
Funeral plans aren’t currently regulated. But the government has announced plans to bring them under regulation by the Financial Conduct Authority.
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 help to resolve customer complaints.
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
Keep all your paperwork
If you do decide to take out a funeral plan, make sure you keep the paperwork in a safe place and give copies of it to your friends and family. A funeral plan that only you know exists is a huge waste of money!
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
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They give you the chance to make the arrangements that you want for your funeral.
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They might protect you against rising costs.
Cons of funeral plans
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They can be expensive. Even if you’re paying in instalments, they’re likely to cost at least £20 a month, or, if you pay upfront, at least £3,000 – and often much more.
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If funeral prices fall, you could end up overpaying for your funeral.
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Some plans don’t guarantee all the costs.
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Funeral plans aren’t currently regulated.
Questions to ask the funeral plan provider
- 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?
For more information about funeral plans, costs and help figuring out if you need one, visit the Which? website
Over 50s plans explained
Remember
If you do decide to take out a funeral plan or over 50s plan, keep the paperwork in a safe place and make sure your next of kin know about it.
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
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They don’t need any medical underwriting. This means that being in poor health makes no difference to your payout.
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You can pay as much as you can afford – unlike funeral plans where minimum premiums are much higher.
Cons of over 50s plans
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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.
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The payout on most plans doesn’t increase with inflation. This means many people end up paying more in premiums than their payout.
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You usually need to survive beyond the first two years of an over 50s plan to get the full payout.
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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.
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.
Find out more about who pays for the funeral and what happens if you can’t afford one in our guide Help paying for a funeral
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.
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:
- For England and Wales, visit GOV.UK
- For Northern Ireland, visit nidirect
- For Scotland, visit the Scottish Government website
