Putting money aside for your funeral

A funeral can be a signigicant and sometimes unexpected expense. Putting money aside is a sensible precaution and will bring peace of mind to you and your loved ones. This can be done in a number of ways and it is important to research the options thoroughly before deciding which works best for you.  

A funeral plan is a way of putting aside money to cover most of the cost of your funeral when you die. Funeral costs are rising and many people worry about not having enough money in their estate and leaving family with a large, and perhaps unexpected, bill. Some funeral plans fix the cost of your funeral at today's prices, protecting against future increases.

Until now, the funeral plan industry has been unregulated.  However, the Financial Conduct Authority is in the process of implementing regulation to enhance consumer protection. This will come into effect on 29th July 2022.  After this date, any funeral plan provider that isn't authorised by the FCA will be committing a criminal offence if it attempts to sell or administer a funeral plan contract. That means that it won't be able to deliver the service it's customers have paid for.

Some funeral plan providers have already received authorisation, others are still in the process of being assessed, have not submitted, or have withdrawn, their applications.  To check the status of a company with the FCA, click here.

At the moment your money is not protected in the same way it would be in a bank or building society, which means if the company goes bankrupt or does not get FCA approval, you may not get your money back.

There are a number of pros and cons to investing in a funeral plan and you will need to look carefully to see if it is right for you. Also, funeral plans vary so check carefully what is, and what is not, included.

 

FUNERAL PLANS - PROS & CONS

Funeral Plans, what they cover and their terms and conditions vary, so it is essential to do your research and take professional advice before investing in a funeral plan. There are a number of pros and cons, a few of which we have outlined here. There are also alternative ways of setting aside money to cover the cost of your funeral.

Pros of a funeral plan

    • peace of mind - knowing that your loved ones will not be left with an unexpected bill for your funeral and that at least some of the costs should be covered
    • being able to arrange in advance the type of farewell that you would like
    • because the money has been invested prior to your death, it will not be subject to Inheritance Tax (IHT)

Cons of a funeral plan

    • not all elements of the funeral are covered by a plan. Some burial and cremation costs and extras such as flowers will not be included
    • if you pay a lump sum upfront, rather than in monthly installments, that money will not be available to you for other things you may need during your lifetime. Consider whether you can afford to have that money tied up if your circumstances change
    • funeral plans tend to be long-term investments and if you die soon after taking it out it there will be penalties (for example, a relative may have to pay the outstanding balance before the funeral can take place)
    • there may be charges if you decide to cancel the plan

ALTERNATIVES

A funeral plan is a way of putting money aside for, and sometimes 'future proofing' against the cost of, a funeral. However, other forms of savings vehicles can achieve the same aim, but may also give you more flexibility in terms of accessing the funds should you suddenly need them. A regular savings account in a bank or building society is more secure and flexible, although won't have the same tax benefits and is subject to the vagaries of inflation and low interest rates.

Funeral insurance (also known as an over 50's insurance policy) is also available. As with a funeral plan, policies vary and have different restrictions and terms and conditions, so it is essential to do your research and take advice before making a decision.