Investing in the inevitable - a guide to prepaid funeral plans in the UK
The importance of planning ahead
Looking ahead to one’s own death might seem morbid to some, yet more people are now seeing it as an act of compassion for their loved ones.
By taking proactive steps to plan your own funeral, you can alleviate future burdens on your family and friends who would otherwise be left to complete all funeral plans and make difficult choices on their own after your death. Your wishes will be clear to everyone, and most of the decisions made - and paid for.
What is a prepaid funeral plan?
A prepaid funeral plan is a financial arrangement made in advance to cover the costs associated with one’s funeral. It is a proactive approach that allows individuals to plan and pay for their funeral services, relieving their loved ones of financial and organisational burdens at an emotionally challenging time.
Why choose a prepaid funeral plan?
There are many reasons why people in the UK may choose a prepaid funeral plan. Here are some of the most popular motivations for the choice.
Financial security/certainty
If you have the income to afford it, a prepaid funeral means you can arrange flexible monthly payments that suit you. This way, you know the costs you are paying up front, locking in current prices to safeguard against inflation and rising costs of services.
People who live in an expensive area of the UK, for example London, may also benefit from a prepaid funeral plan as it is a good way to split an expensive funeral into manageable, regular payments.
Most funeral plans offer a fixed rate to their customers, regardless of location, meaning that you may avoid paying the premium usually attached to funeral services in your town or city.
For people anxious that there will not be enough money left in their estate to pay for a funeral when the time comes, a prepaid plan can help offset this fear.
A prepaid funeral plan can also help your loved ones avoid being left with a large - and potentially unexpected - financial burden when you die.
Prepaid funeral plans bring emotional relief to loved ones
Planning a funeral is, of course, more than a financial burden for people who are recently bereaved. It is also challenging emotionally.
Planning ahead for a funeral means that the family are more free to support each other emotionally rather than have to worry about finalising arrangements and making payments. This can allow them to grieve naturally and relieves stress for all involved.
Control over your personal funeral wishes
Funerals in the UK have evolved to become bespoke, custom events - making it possible to create a send-off that truly reflects the character and wishes of the deceased.
If you have a certain vision of how you would like your funeral to be and want complete control over the options, then a prepaid funeral plan makes this simple.
When you enter into a prepaid funeral plan agreement, you are able to specify all the details - the venue, the readings, food, music - and much more. This allows you to create a service to reflect your personality and to craft a personal farewell to your family and friends.
Avoiding family disputes
Another benefit of using a prepaid funeral plan to make your wishes clear in advance is that this can also help to avoid disagreements and arguments between family members. At times of grief, tensions can boil over. People can say things they don’t really mean, causing upset at a time when unity is needed.
If your wishes have been unequivocally set down through a prepaid funeral plan, then this may be avoided.
Also, with the financial side of the funeral plan already paid, there is much less scope for family arguments over who pays the bill.
Understanding Prepaid Funeral Plans
When considering a prepaid funeral plan in the UK, it's essential to grasp the various types that are available and understand how they work. This section provides an in-depth exploration of the different prepaid funeral plans, their structures and the regulatory landscape in which they operate.
Check the terms of your plan
With so many companies in the UK market providing prepaid funeral plans it’s important to make sure you know exactly what you are getting.
Benefits and services obviously vary between companies, but be aware that each company will offer various plans with different levels of cover and services.
Take the time to double check what your chosen plan provides and cross check with other plans to make sure you are signing up for the right services.
Different types of prepaid funeral plans in the UK
Fixed monthly payment plans:
Fixed monthly payment plans provide a structured and predictable way to budget for funeral costs. Policyholders pay a fixed amount every month, making it easier to manage expenses over time.
This type of plan often comes with the flexibility to customise the funeral arrangements and tailor the length of repayments to your budget. Many of the top UK providers will offer an interest free funeral plan if you are able to pay in full over 6-12 months, but also offer long term payment plans spanning across years and decades. Long term funeral plans will usually accrue interest, however.
The most popular providers of monthly funeral plans in the UK will usually offer different tiers of plans according to your wishes and budget. For example, a ‘Bronze’ tier plan may have limitations on the time and day of the week the funeral can take place, whereas a premium ‘Gold’ plan might allow you to specify that the funeral is held on a Friday, for example.
The basic plans will also usually include standard transport and coffins, whereas premium monthly plans could include limousines and top-of-the-range wooden coffins.
Lump sum prepaid funeral plan
Paying for your funeral in full (a lump sum) in advance can be a good option for those who have the money available to do so and want to have the whole process completed quickly.
It locks in the cost, protecting you from inflation and price rises and records your funeral wishes in one simple process. Most lump sum prepaid funeral plans will allow you to choose from many options to create your perfect send off.
But remember, there will be different plans available, so check the finer details carefully before committing.
Signed and sealed - checking contracts
Whether you choose to arrange a prepaid funeral plan online directly with the plan provider or through a price comparison site or broker, or apply in person at a funeral director’s office, your funeral preferences, payment schedule and the terms and conditions will be collated into a contract.
Remember to double check the fine print in the terms and conditions to make sure all the details are correct and you understand the commitment you are making.
The contract will usually begin from the first payment made on the account and you will receive documentation confirming the details.
Make sure that your loved ones know about your prepaid funeral plan
If you have finalised a prepaid funeral plan and are making payments on it, it’s essential to make sure that the right people know about it.
Make your family or close friends (the people who are most likely to assist with your funeral) aware of the plan and let them know where the documents are to be found. It’s essential you keep these in a safe place.
If you received them digitally, email them to your loved ones too. It also doesn’t hurt to keep a printed version of the documents in a safe place where they can be easily found.
Most plans are simple to action after death - usually, a quick phone call to the provider is all that’s needed to get things moving.
Are prepaid funeral plans the same as life insurance?
Simply speaking, the answer is no. There are some similarities, which might confuse people who are new to the concept of a prepaid funeral plan, but a funeral plan is an amount that is paid and used for funeral costs only, whereas a life insurance payout may be used for anything.
One major advantage of a prepaid funeral plan over a life insurance policy is that there is no lengthy claims process or investigation with a funeral plan. The money has already been paid to the provider and there is no need for a claim investigation or the other processes that life insurance policies and over-50s policies may involve.
Understanding funeral insurance and over-50s insurance policies
The UK’s leading insurance providers offer a variety of products under the blanket terms of funeral insurance and over-50s life insurance policies.
Plans vary with different providers, but over-50s insurance cover will usually pay out a lump sum to the deceased’s family upon their death. This payment, however, may not be enough to cover all of the funeral costs when the time comes due to inflation and rising costs and the level of cover chosen.
Families are also not technically obliged to use this lump sum amount for funeral costs. Also, if you think you would like a funeral that will cost a lot of money, then the monthly premium in order to achieve this payout may be costly and the end result may still fall short because of rising prices. With all insurance, there is also the potential that will get less out of the policy than you pay into it. For these reasons, many people choose a prepaid funeral plan over insurance.
When somebody dies and they have funeral insurance or an over-50s insurance policy, there is a claim procedure that must be followed. In some cases, the money may not be released to the family particularly quickly, meaning that funeral arrangements may have to be delayed until the payout is complete. A prepaid funeral plan, however, as it’s already paid in full, will be a much quicker experience.
Is my money protected in a prepaid funeral plan?
When buying any financial product it is important to have a guarantee that your money is safeguarded against fraud or the failure of the provider you have chosen.
In the UK, the Financial Conduct Authority (FCA) oversees the financial services industry, protecting customers and the financial markets.
Are prepaid funeral plans regulated in the UK?
Prepaid funeral plans in the UK have been regulated by the FCA since July 2022. If you are considering a prepaid funeral plan, make sure that your provider is a reputable, FCA-approved company.
Check that your prepaid funeral plan provider is regulated
If you are considering a prepaid funeral plan in the UK make sure that your provider is on this list. If they are not, choose a provider who is, otherwise your investment is completely unprotected.
All funeral plan providers in the UK must now be registered and approved with the FCA. If you already have a funeral plan with a company that is not registered and fail to switch it to an approved provider, you will not be able to claim any compensation if the provider fails.
The FCA has published a list of prepaid funeral plan providers in the UK who are NOT registered; you can view it here.
What are the alternatives to prepaid funeral plans?
Prepaid funeral plans are a convenient and safe way to ensure peace of mind when the time comes. Some people, however, may prefer to have more autonomy over their own finances or be lucky enough not to need to split costs into smaller monthly payments.
In this section, we will explore the other ways people in the UK can make financial preparations for their funerals.
Start a savings account to cover future funeral costs
Some people choose to start a savings account that is to be used for funeral expenses.
Like a prepaid funeral plan, you can set up a standing order from your current account to pay funds into the savings account and also add lump sums whenever you please. Because of the convenience of internet banking, this is a very simple option.
Advantages of using a savings account for funeral costs
- When using a savings account from a licensed bank in the UK you have assurance that your funds are protected.
- The money can be accessed at any time and is under your control.
- Can be a joint account so that a family member or partner can access the funds to pay for the funeral when the time comes.
Disadvantages of using a savings account for funeral costs
- The account will only accrue basic interest and will not safeguard against rising funeral prices.
- This method doesn’t allow you to pick out specific options to help the person arranging the funeral. You will have to make your wishes known by another means.
- You need to ensure the other person has the authority to access the funds upon your death.
Using a funeral loan
At Fenix Funeral, we recognise the emotional and financial burden that comes with planning a funeral. To ease this burden, we proudly announce our partnership with Funeral Safe, a leading provider of financial solutions tailored specifically for funeral expenses.
This collaboration is designed to support you during these challenging times by offering flexible, unsecured personal loans, ensuring that financial constraints do not stand in the way of arranging a dignified service for your loved one.
Through our partnership with Funeral Safe, you can access funeral loans ranging from £500 to £10,000, with the flexibility to spread repayments over 12 months to 5 years. This range accommodates different financial needs, ensuring you can find a plan that suits your situation. With APRs between 10.75% and 27.9%, Funeral Safe strive to offer competitive rates that reflect our commitment to providing affordable funeral financing options.
One of the key benefits of our partnership is the potential for same-day loan approvals. This means that, upon application, you could quickly receive the financial support you need, allowing us to proceed with the funeral arrangements without delay.
Furthermore, Funeral Safe offers a three-month grace period before any repayments are due, during which no interest will accumulate. This period allows you some breathing space to manage your finances without the immediate pressure of loan repayments.
Our partnership with Funeral Safe is underpinned by their robust regulatory framework, authorised and regulated by the Financial Conduct Authority. This ensures that you engage with a trustworthy and reliable service, offering peace of mind during difficult times.
Prepare for the future with a Statement of Wishes with Fenix
At Fenix, we don’t sell traditional prepaid funeral plans, but we do offer a flexible alternative to make your funeral wishes clear, providing priceless clarity and peace of mind for you and your loved ones.
Our Statement of Wishes service takes the best elements of a traditional funeral plan and combines them with flexibility and financial freedom. It involves no prepayments or contracts.
As part of our free service, one of our experienced Funeral Arrangers will discuss every element of your funeral with you. Your detailed wishes for the funeral service and all extras will then be recorded alongside the details of your next of kin and estimated future costs. Once the Statement of Wishes is finalised, a copy is shared with you for safekeeping.
Investments to cover funeral costs
Investing in the stock market or other funds via wealth managers could help your money grow in line with inflation, offering a hedge against rising funeral costs in the future. A licensed financial advisor or wealth manager could help you draw up a plan.
People living in the UK can open a stocks and shares ISA which tracks the prices of chosen stocks to potentially profit from their performance.
Advantages of investing to cover funeral costs:
- Investing in the stock market or other vehicles can hedge against inflation and rising costs.
Disadvantages of investing to cover funeral costs
- The risk is higher and there’s a chance you might lose all of your money if assets underperform.
- More complex and usually needs the assistance of a financial advisor.
Use the money in your current account
If you have a joint current account with your spouse or civil partner, if you are to die they will still have full access to the funds in the account.
This money can be used for any purpose after your death, including any funeral expenses. Of course, this approach assumes that there is enough money in the account to cover these expenses and will not be an option for everyone.
If you do not have a joint account with your partner, they may still be able to access the money in a timely fashion to cover funeral costs before inheritance tax is calculated. Most banks will release funds to cover funeral costs earlier than the rest of the estate if an invoice from a funeral director and a copy of the death certificate are provided.
Over-50s life insurance plans and funeral insurance
As we have already discussed, life insurance and funeral insurance plans are readily available in the UK. To summarise the pros and cons of such policies again:
Advantages
- Protected by FCA if using a registered insurer.
- Manageable monthly payments.
Disadvantages
- Does not ‘lock in’ prices against inflation like a prepaid funeral plan
- Does not record your specific funeral choices and wishes
- May take longer to get the lump sum payment after death, delaying the funeral
- If you cancel the insurance before the end of the term, you may lose all the money you have paid into the policy.
Using the money in your estate for funeral costs
Any property, money and assets that you own upon death are known as your estate. Personal circumstances vary so every person’s estate will be different, but it is usually left to family members and spouses; the details specified in a will.
If you do not want to take out a prepaid funeral plan or insurance, you can specify that some of your estate is left to pay for your funeral. This needs to be made clear to your next of kin, or whoever will be organising your funeral according to your wishes or otherwise.
Advantages of using your estate to pay funeral costs
- No extra administration is needed other than a small clause in your will.
- The funeral can be budgeted according to the amount in your estate.
Disadvantages of using your estate to pay funeral costs
- Money may not be instantly available to cover funeral costs so the organiser will need to have enough money to pay for the funeral before being reimbursed.
- Does not ensure your funeral wishes are recorded like a prepaid plan does.
Consider all options and harness the power of planning ahead
We hope this guide has helped guide you through the landscape of prepaid funeral plans and their alternatives in the UK. It is clear that there are many products on the market and personal preferences, risk tolerance and finances all play a part in finding the solution that works best for you and your loved ones.
Although it’s daunting to look ahead to death, this forward planning has tangible benefits not only for you personally, but the people you love the most.
By taking command of your own funeral choices in a proactive way, you can claim back your agency over the inevitable. This won’t lessen the emotional impact of your death, but it may help you feel more at peace, knowing each eventuality is catered for.
By taking steps to get your own financial affairs in order and making provision for the costs associated with the end of life, you are leaving your loved ones a priceless gift. This legacy is one of clarity and peace of mind at an emotionally draining and challenging time in their lives.
Contact Fenix today for help and advice on anything relating to funerals in the UK
If you need assistance with any aspect of funeral planning in the UK, our compassionate staff are always here to help. Call us today for free advice and non-binding quotations for stress free funeral options to suit all backgrounds and budgets.