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What is a prepaid funeral plan?

prepaid funeral plan

A prepaid funeral plan is just that – something which allows you not only to plan every last detail of your funeral, but also to pay for it well in advance.

Even though the event itself might be many years hence, it may never be too early to start making your funeral plan. Do it now and it is something you do not have to think about later. Pay for it now and you may also beat the inexorable process of inflation, when it is likely to cost you considerably more in the future.

How do they work?

Prepaid funeral plans work on a very simple and straight forward principle – they allow you to:

  • plan your funeral now, whilst age is on your side and you have all your faculties for deciding just how you want the occasion to go; and
  • pay for it now, at today’s prices, before the steadily rising costs of arranging a funeral make it considerably more expensive at some future date.

According to an investigation by the BBC in October 2015, as many as one in ten people who have left their funeral planning until the very last minute, now find it difficult for them or their family to pay the expenses – currently costing an average of £3,700, but rising at four times the rate of inflation.

Prepayment offers a way of steering clear of any such predicament.

Is my money safe?

You might have entirely reasonable fears about paying for something that may not be needed until many years in the future.

Your local funeral directors, for instance, might offer a prepaid funeral plan – you are able to make all the arrangements with a firm you know and trust and are able to budget certainly for the expenditure in future. But what if the firm becomes insolvent in the meantime? The money you have paid over may be seriously at risk.

National providers

Fully aware of that natural worry, there are national providers who take steps to ensure that the money you have paid remains entirely safe and ready for use when the time comes.

This is achieved by one of two ways and may involve you paying a single lump sum or a number of equal instalments:

  • the latter is likely to be in the form of a life insurance policy which pays out an agreed sum whenever you die and the funeral arrangements need to be made;
  • alternatively, your lump sum may be paid into a trust fund, with its security guaranteed by trustees.

Whether a trust fund or a life insurance policy, the Financial Conduct Authority (FCA) sets out rules which the provider must follow in order to ensure the security of the monies you have prepaid.

Providers of such schemes may also be members of the industry’s own representative organisation, the Funeral Planning Authority (FPA), which maintains a code of conduct and practice, again designed to enhance the security of customers’ money and to provide financial support in the event of one of its members becoming insolvent.

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