Funerals are expensive, so many are opting for pre-pay packages to spread the cost. But are they worth the money? Here’s what you should know.
Morbid it may be, but planning your own funeral is becoming more and more common among Brits.
Pay now, die later – as it’s known in the industry – is big business in the UK, estimated to be worth over £500 million a year.
The idea is simple: you pay a company, or an insurer, to take care of your funeral so your family don’t have to cover the costs when you die. You pay either in instalments or in one payment at the beginning of the plan.
Why is this popular?
According to funeral planner Dignity, the average cost of a funeral has increased by 58% in the last seven years, outstripping inflation. This often leaves families with a huge unforeseen bill of around £3,500.
One of the key benefits of funeral plans is that they are guaranteed to cover the costs of the agreed funeral arrangements, regardless of any future rise in price.
Covering the cost of a funeral before you die also allows you to choose certain elements, like flowers, music, and a coffin.
Ian Mackie, managing director of funeral planning for The Co-op explains why people want to do this:
“The fact that more people are arranging tailor-made plans with us really shows that they want to take the time to talk through all the options.
“It’s a wish to personalise and have everything just right so that their funeral is special to them.”
But there are a few things you need to know before entering into a pre-pay plan.
Read the small print
Yes, funerals are expensive. But paying for something over time costs more because it incurs interest.
However, a spokesman for the CUNA Mutual Group says: “It would take a long time to be out of pocket and with savings interest rates low it’s arguably a sensible way to plan ahead.
“If a 29-year-old man pays £2 a month for 70 years - making him 99 years old when he dies - he will have paid £1,680 and will receive £2,000. An arguably positive return on investment even in the very long term.”
Always shop around
Pre-pay plans relieve families of any financial burden, but it seems they’re only good value if you know what you’re paying for, and measure the real cost against any alternatives.
Before deciding upon a pre-pay plan, find out what exactly the plan includes and compare against the cost of organising all aspects separately, bearing in mind that prices might rise.
What other funeral options are available?
Traditional savings - It’s worth weighing up against any traditional savings methods, like an ISA.
This could help set aside the money for a funeral, which can then be organised separately by family members.
Whole of life cover - A few over-50s life insurance providers, such as Sun Life, include whole-of-life cover.
This means the cover doesn’t stop at a set age but continues until you die in order to pay for funeral costs.
Home burial - Yes, believe it or not, this is legal – you can be buried in your garden, subject to several requirements.
You’ll need permission from your local authority, environmental health included, and the local police should be informed.
And take a moment to think about the effect this will have on the value of your property.
Funeral payment - If you or your partner are on low incomes or receive benefits and need help towards the cost of a funeral then there is a government subsidy available.
Be aware that it may have to be repaid from any money tied up in the deceased’s estate.