At its simplest, a funeral plan allows you to pay upfront for your funeral so your relatives don’t have to cover the costs themselves – although they are allowed to pay for your funeral using money from your estate as soon as you die (and it’s not subject to inheritance tax).
You can buy a funeral plan from either a funeral-plan provider or directly from a funeral director. You have the choice of either paying a lump sum or monthly instalments, usually over one to ten years. One-off payments usually range between £3,000 and £5,000.
What is included in a funeral plan?
A funeral plan will not include everything you need for a funeral. Exactly what is covered will vary from provider to provider. Funeral plans may cover viewings of the deceased, a limousine procession and a church service, but burial plots are often left out. Other costs, not traditionally met by a funeral director, are also not included, such as the cost of flowers.
In addition, some costs may not be met fully, and your family may have to pay the rest. For example, many providers only contribute towards the cost of cremation or burial. As always, check the details to make sure you know exactly what you are buying.
Is my money safe?
To safeguard your plan, your provider will either place it in a trust fund or invest it in an insurance policy that pays out when you die. The Financial Conduct Authority doesn’t directly regulate funeral plans, but it does have rules to safeguard your money if it is placed in a trust or invested in an insurance policy. There is a professional body for providers called the Funeral Planning Authority (FPA), which has a code of conduct that all of its members must comply with. As part of the code, the FPA’s members and the FPA itself pledge that if a provider goes bust they will look into paying for funerals that are covered by funeral plans. You may also be protected under Section 75 of the Consumer Credit Act 1974. Under the Act, a credit card provider must protect purchases over £100 if there is a problem with good and services you have paid for, or if the company you are buying from goes bust. If you are paying for your funeral plan in total upfront, you can benefit from Section 75 protection by putting part of the bill on your credit card. If you want to pay by monthly instalments you can also gain protection by using the a credit card to pay any deposits or asking your provider to pay part of the bill upfront using the card.