Are Prepaid Plans Safe?
If you’ve asked yourself “How safe is a prepaid funeral plan?” this article is for you.
The idea of a funeral plan is to help you meet the cost of your funeral so those you leave behind don’t have to cover it themselves. You might think prepaid funeral plans are a relatively new idea, but they’ve been around since the 19th century when penny policies, burial clubs, and cremation clubs were created.
People took out penny policies to cover a person’s funeral expenses. Many people on low incomes started paying into this type of plan as soon as their first children were born. Door-to-door insurance salespeople would collect the penny premiums once a week or once a month.
Fast forward several decades, and we now have something called a prepaid funeral plan. Thanks to inflation, premiums are higher than a penny, but the idea of saving a small amount each month is still a smart thing to do.
How do funeral plans work?
When you pay into a funeral plan, it means you can plan ahead and make provision for the costs of the funeral, saving your loved ones from covering these expenses.
How does it work? You can take out a plan either directly with a funeral provider, or with companies that sell plans that will be allocated to a funeral director that can deliver on your wishes. You can either pay in one lump sum, a fixed number of instalments or there are Over 50s plans with modest monthly payments that you must continue to pay.
Pre-paid funeral plan companies can either place the purchase money into an independent Trust or purchase a whole of life policy. Pure Cremation offers both options.
The money in a Trust fund can be divided between cash holdings, insurance policies and investments managed by a qualified and regulated investment manager. The Trust must be audited annually and must have an actuarial valuation every 3 years.
Pure Cremation Funeral Planning Trust goes further than this and carries out audits and actuarial valuations every year. The Trustees aim to ensure that there is always more than enough money available to fulfil every plan holder's arrangements in a single year.
The PCFP Trustees have instructed their investment managers to follow a conservative investment strategy with a strong ethical element.
Money is only transferred to the funeral provider when it is needed.
Because the money you pay is placed into a separate Trust or policy, it is safe even if your chosen funeral director goes out of business. The plan provider will simply find an alternative funeral firm to carry out your wishes.
What funeral costs does a funeral plan cover?
So what does a funeral plan cover? Precisely what is covered depends on the provider, but commonly a plan will fully cover the professional fees for the level of service you want the funeral director to provide PLUS a contribution towards the third-party fees such as the crematorium, celebrant and any doctors' fees. This will usually mean the family must pay for some of the costs.
There are different levels of plan available so you can choose the style of coffin and number of limousines. However while you can specify a desire for a church service, the costs cannot easily be included in a plan and must be paid at the time of need.
A Pure Cremation pre-paid plan is guaranteed to cover everything included in this simple service. Owning our own crematorium means we are in full control of the costs - very few providers are in this position.
The huge variation in fees for burials make it impossible for plan providers to do more than include a contribution towards the opening of a grave. Any new burial plot will be purchased separately at the time of need.
Always check what is included, what is guaranteed, and what your family will need to pay for at the time the funeral is carried out.
Here at Pure Cremation, we make the process really simple. In every Pure Cremation plan we include the following:
- Collection of the body from anywhere in the UK
- Doctor’s fees and cremation fees
- A solid pine eco-coffin
- Transportation of the deceased to the crematorium
- Scattering of the ashes in our Garden of Remembrance or delivery to a mainland address within 21 days of the cremation
Your family can request an attended committal for an additional cost at the time of need. We don't include this in our plan price because the vast majority of families want to hold a separate farewell.
Regulations of prepaid funeral plans
FPA standards for funeral plans
When choosing a Funeral Plan Provider, you should make sure that they are registered with the Funeral Planning Authority (FPA), which is a voluntary organisation set up to regulate UK Prepaid Funeral Plan providers. Being a member of the FPA requires annual reviews to ensure the company is operating to a high standard and will be able to deliver the funeral that the customer has paid for.
The FPA has strict rules to which all members must abide. However, it isn’t a legal requirement, and therefore not every company is a member. This makes it important to check any provider before purchasing a plan to make sure your plan and money are both safe.
FCA update on funeral plan regulations
In June 2020, the government announced that the FCA will regulate funeral plans in the future. The government has published a timetable for bringing the regulation of pre-paid funerals within its remit.
The expectation is that the FCA will take responsibility for the prepaid funeral plan sector by the summer of 2022. Consultations will be taking place in spring 2021 on its plans for regulating the industry. Included will be the proposed rules and approach to authorised firms. All responses will be considered and the rules finalised later in 2021.
The aim is to ensure that vulnerable customers are not exposed to high-pressure sales techniques and that the money paid is managed responsibly.
For the last 2 years, Pure Cremation has been working to ensure it already meets the FCA criteria for selling and administering regulated products.
Trade bodies that work with funeral plan providers
There are several other organisations, trade bodies, and associations which funeral plan providers and funeral directors can work with. Some of these are relatively new, while others have been in existence for many years.
Membership of a trade body should not be relied on as an indicator of the quality of the funeral plan sold. You must still check the service levels and T's & C's for yourself.
It is also important to check whether your chosen funeral firm will accept the pre-paid plan that you are most interested in.
The trade bodies include:
- National Association of Funeral Directors: NAFD is the largest trade association for the funeral sector. The association represents the funeral industry and lobbies the government on its behalf. Every year, members of this association conduct more than 470,000 funerals. High standards are set for the industry through its code of practice. The NAFD includes independent funeral firms and big groups that sell their own plans
- National Society of Allied and Independent Funeral Directors(SAIF): The members of this trade association are independent funeral directors. The society was established in 1989 and has more than 860 members across the UK. There are also more than 100 associate members who supply services and products to the funeral profession. SAIF aims to promote and protect the interests of independent funeral directors.
- National Federation of Funeral Directors (NFFD): This trade body was set up in 2010, and it aims to increase funeral cost transparency and consumer choice. The plans offered will vary from member to member. There has been a strong link with the Safe Hands funeral plan which, in the past, some funeral homes have refused to accept.
Which is safer: funeral plan or funeral insurance?
In the event of your death, both funeral plans and life insurance pay out a lump sum. There are, however, some fundamental differences between both options.
One of the benefits of a funeral plan is that it covers an agreed service level. Even if these have gone up in price the plan should cover these services as set out at the time of purchase. This and a decent contribution towards the third party fees will give great peace of mind.
A funeral can also be paid for using cash from a life insurance policy or Over 50's plan. This lump sum can be used for any purpose but for many, it's an important way to ensure that funeral costs are provided for.
These policies require continuous payments so you may end up paying in more than you get out.
These policies are not specific funeral plans so if you really want to make things easy for the people you leave behind you'll need to leave separate funeral instructions as well.
Pure Cremation's Over 50s funeral plan is a little different. Instead of a fixed lump sum, you get a Pure Cremation, which means that there is an element of inflation-protection not offered by the standard Over 50s style plan. It also means your family don't have to make decisions about the cremation itself - everything's sorted!
What happens if I die before my funeral plan is paid?
What happens if you die before all the instalments have been paid depends on the funeral plan contract and its terms and conditions. Generally, you can expect your representative to pay for the outstanding balance. If you have met the conditions of the Over 50s plan provider or insurance policy provider (usually a minimum of 24 continuous payments), then the policy should pay out in full.
Pure Cremation has its own set of terms and conditions that relate to the direct cremation funeral plan we provide for our customers. Make sure you read them before purchasing a cremation only funeral plan.
Choosing one of the many prepaid funeral plan companies
Buying a funeral plan is an important decision, and one that requires careful consideration of what is included, the costs and how you can pay. We've already mentioned that you should look for a funeral plan provider who is registered with the Funeral Planning Authority. Here are some more things to think about:
- Your funeral requirements: Spare your loved ones from difficult decisions (and arguments) by clearly stating your key wishes. Would you prefer a church service, a cremation, a burial or a direct cremation? Explore the types of funeral services in advance.
- Check what is and isn’t included: It’s important to compare not only funeral plan prices but also any additional costs there may be to pay in the future.
- Ensure your money is protected: Is the money you pay either placed into a secure and independent Trust or used to purchase a whole of life policy?
- Is the quality of service guaranteed?: Check the provider’s code of practice.
- How much can you afford to pay: Consider whether you would like to make a single payment or pay by monthly instalments.
- Support from your plan provider: Choose a provider that stands up to a high level of care and support to yourself and your loved ones.
Compare funeral plan prices
When comparing prices, always check the features of the service. Here at Pure Cremation, we take pride in offering a service that includes everything you need for a direct cremation. From the moment you first get in touch to the return of a loved one’s ashes, we offer totally seamless care.
Check funeral plan reviews
Each and every funeral plan provider offers a unique service, but one of the best ways to gauge whether a plan is right for you is to read customer reviews. These will tell you about the experience of purchasing a plan, e.g. whether the staff are knowledgeable, helpful and caring.
Pure Cremation collects reviews for this and for the customer experience when carrying out the cremation itself.
What if your funeral plan company goes out of business
Nothing in the world is certain, and one risk that might concern you is if your funeral plan company goes out of business. When choosing a funeral plan provider always check what will happen in such an instance. Generally, you would be given the option to transfer the active plan to a new provider or get a refund.
If anything were to happen to Pure Cremation as a company, your money would be safe and could either be returned to you or transferred to a different provider with your permission.
You can learn more about the trust and how it keeps your money safe.
Secure your money with a trustworthy funeral plan
If you think a funeral plan is right for you it’s important to get the best funeral plan to suit your needs. Funeral plans are designed to help you meet the cost of your funeral and make planning your send-off much easier for those left behind. If you choose an FPA registered company you can be confident your money is protected.
If you need to make arrangements in advance, we can help by giving honest information so you can decide whether our funeral plan is right for you. Please, get in touch for more information.