Piece of mind for the man with the plan

Charles 18 Comments

There’s an unsparing piece in The Times, 11 November, on financial products associated with funeral planning:

Hundreds of thousands of the poorest pensioners are losing thousands of pounds by buying into poor-value funeral planning products offered by some of the most trusted high street names.

Funeral benefit plans offered as add-ons to over-50s life insurance promise to help those aged between 50 and 80 to set aside a pot of money for their families to pay for their funeral … First, the majority of people who invest in over-50s plans end up paying in much more money than their relatives receive in the cash lump sum. Second, in many cases the funeral plan add-ons are assigned to particularly expensive funeral directors, and, finally, the lump sum payouts are not protected against inflation or linked to specific funeral costs so they are likely to cover only a small proportion of the cost of a future funeral.

Sales of over-50s policies rose 25 per cent between 2008 and 2010, with 346,128 people buying policies last year alone. Sun Life Direct, for example, has 750,000 such customers … This type of insurance policy does not have a “cash-in value” so policyholders often find themselves facing the dilemma of whether to continue to lose money paying premiums until they die or close the account and forfeit the cash lump sum.

The funeral benefit option on these products effectively assigns the cash lump sum to a funeral provider with whom it has a commercial deal, usually Dignity or the Co-operative.

Insurers are also pushing policyholders’ families towards funeral directors that charge the highest fees. The two main providers that arrange funerals as part of a funeral benefit add-on are Dignity and the Co-operative.

Dignity and the Co-operative argue that it is worth paying more for their service … A spokesman for Dignity says: “Dignity provides an allinclusive service with no hidden extras.”  A spokesman for the Co-operative says: “The Co-operative provides customers, and their families, with the invaluable peace of mind afforded by planning for their funeral in advance. We believe that, when compared on a like-for- like basis our charges are fair and reasonable and highly competitive for the standard of service that we provide.”

Age UK, an organisation that helps the elderly, has been accused of exploiting its reputation to sell unnecessarily costly funeral plans. A former senior employee of Age Concern is critical of these plans. He believes that Age UK is trading on its good name to sell overpriced products to vulnerable pensioners. He says: “Age UK uses its local branches as a route to a market where it can sell its branded products. Very often it is the less well-off pensioners using day care centres that are sold these products. Age UK funeral plans are particularly poor value because they encourage families to use expensive funeral directors rather than a cheaper local director.”

Age UK’s unholy alliance with Dignity brings in something like £9 million a year. 

The last point the article makes is that funeral plan funds are not regulated by the FSA. Did you know that? Ah, you always assumed they must be. Well, they’re not; they’re regulated by the Funeral Planning Authority — whose shareholders are trade associations for pre-paid funeral plan companies, creating a conflict of interest.

Coming soon: more thoughts about the ticking time bomb of the pre-paid funeral plan. In the meantime, stash it under the mattress. 


  1. Charles

    I am SO GLAD you posted this Charles. I get a lot of people asking about funeral plans. As a 5 month old company, I feel very nervous about promising we can provide a service for a fixed fee perhaps 10 years in the future.

    I know people want peace of mind. But what if you die in another country? What if you move to another part of the UK? What if you change your mind about what you want? And your family may well get another bill when you die anyway – because the cost of burial, medical certificates etc may have risen dis-proportionately.

    What does everyone else think about this?

    1. Charles

      People could consider saving in an appropriate vehicle — under the mattress, fund in mutual society, wotever — that is nothing to do with the funeral business. Tell the rellies about the arrangement, so they can cash it in when the time comes. Avoid the sharks and their horribly constrained packages. Simples.

    2. Charles

      Hello Poppy,

      I think you’d be right to feel nervous about that particular bag of ferrets. We receive around half a dozen calls a day this time of year, from people wanting a arrange a funeral plan with us for a direct cremation.

      I just cannot find a suitable plan that offers a product in the same price bracket as my current charges. Nor, I have to say, do I currently have full confidence in the financial markets to sell such a product to my clients.

      If things went wrong, I’d feel personally responsible. An opportunity missed perhaps, though I can sleep at nights….

      If you find a decent, appropriate plan, Poppy, please do let me know.


  2. Charles

    I think pre-paid plans are a lousy idea. Put the dosh, as the Deathly Sage himself says, under the mattress. Keep your freedom of choice, particularly the freedom to choose really a good-value, sensitive funeral director and celebrant (of whatever sort.) And as Poppy says, the freedom to change your mind. The sums, as the aforementioned DS has been pointing out for years now, don’t stack up.

    Someone said to me the other day “but ordinary savings are eroded by inflation.” I replied, quite temperately for me, “are you sure a pre-paid plan is protected against inflation, when the final payment minus fees minus the effect of having an expensive funeral director chosen for you is all taken into account?”

    The effort of having to contemplate your own funeral and how you and your family might want it to be makes you consider your own mortality, and hopefully the precious value of the present moment and the present life. Handing it all over to a direct debit each month carries on the business of avoiding grown-up truths. The funeral planners step in with their sweet anaesthetic: “leave it all to us. It will be kinder to you and yours. We’ll take care of it all.”

    Bugger off, I say. We’ll do this our way.

    Sorry Poppy, maybe you wanted a well-balanced view….

  3. Charles

    I agree completely. In the new edition of The Natural Death Handbook, one of the things we promise to campaign on is to raise awareness of the risks of some of these schemes, many which are intensely misleading, particularly life insurance, and can trick the elderly into paying over the odds for their funeral, then confiscate the lot if one payment is missed. The surge in aggressively marketed per payment schemes owes nothing to looking out for the customer, and everything to snapping up future clients and cornering the market. The magazines of both SAIF and the NAFD are nothing more than vehicles for pre payment schemes. The irony is, as you point out Charles, that the collapsing global economy means the financial returns are far from assured. Funeral directors are being suggested as where the buck could stop. It’s not as if the architects of these financial disasters ever carry the can. Venal mendacity.

    1. Charles

      Ru, can we please have a booklet that gives a clear explanation of how different kinds of plans or arrangements work, and how they compare in their execution as well as cost? It’s a bit confusing at present, to say the least, and with such information to hand it would be so much easier to argue the case in defense of the victims of these schemes, or to demonstrate to those considering buying a plan what they’d be getting and whether an alternative may be better.

      Thanks in advance

      (ps: I for one wouldn’t mind paying for this booklet.)

  4. Charles

    I have a different opinion to those expressed above. Perhaps it doesn’t make good business sense, but I think it’s better for people to feel secure than it is for funeral directors to be too worried about their profit margins. I am therefore quite happy selling a funeral plan at a fixed price, and guaranteeing that there will be no more to pay at the time of need. I might lose a bit on the transaction, but the goodwill it generates is worth far more than that. Feedback I have received from clients who have compared the funeral plans of all the funeral directors in St Neots is that they have chosen mine because I will guarantee the full cost, whereas no-one else will. Those clients will tell their friends, and this generates goodwill in the community. I see no harm in that at all.

  5. Charles

    Very interesting article Charles and an area of funeral plans that needs to be highlighted.

    Overall I think funeral plans can be beneficial but it depends on the financial instrument that will pay for the funeral when it is required along with the amount of choice and personalisation allowed in planning the funeral itself.

    With the over 50s life policies sold now I do wonder what will happen in 30 years time when they are claimed upon. As the article says the shortfall maybe significant, leaving the surviving relatives to settle the difference. They may well be under the impression that everything is covered financially when it is not.

  6. Charles

    Last time we discussed this topic (Not so cunning after all?
    Thursday, 3 May 2012 – Blog Post) we hadn’t had the discomfort of the latest TV exposure.

    It poses the question, that if there were to be a similar scandal brought to the attention of the media, which involved funeral plans, as opposed to funeral directors, would the plan providers “spring-back” as easily?

    Would those that had invested their money and trust in their future (dream) funeral be as forgiving?

    Hope we don’t go there.

  7. Charles

    I am not a fan of funeral plans either. There are two parts to this. Wanting to take control to some extent to plan your funeral, and let people know what you want, which you can do by completing a Funeral And Farewell Wishes document – and to put money aside to pay for it, which you can do through investments, ISAs and a number of other financial products without incurring high administration fees. I spoke to Dignity some time ago about how they justified their scaremongering claims that funeral costs would go up horribly over the next few years, and they could not give a satisfactory answer. Most of the increases in cremation fees as a result of reducing pollution are now complete. Their justification was wage inflation! Oh sure! I think funeral plans are all about future market share and marginal profits for the big players, and the independents have been caught in the headlights. We offer a free funeral planning service, with a big emphasis on what the client wants and no obligation to pay into a financial transaction that can only be reversed at a huge cost.

  8. Charles

    Simon, you are quite right that it is all about future market share. But for that very reason shouldn’t we as independents be concerned about that?

    I was told yesterday that independents conduct approximately 60% of at-need funerals, whereas Dignity and the Co-op sell approximately 60% of pre-need funerals. It doesn’t take a rocket scientist to work out what that means in the future.

    Any kind of Wishes Document, as we all know, is just that. Whilst some, perhaps most will be honoured, there will be a percentage which won’t, for whatever reason. A nursing home duty member of staff who wasn’t aware of it for example.

    Whether we like it or not, pre-need funerals are here to stay, and it is my belief that independents need to be much more concerned about them than most are.

    1. Charles

      Andrew, it’s true that it doesn’t take a rocket scientist to work out what that means, but the maths isn’t as simplistic as it may appear. If Colin Moore’s figure of 5% of funerals paid for in advance is right, which I’m sure it is, then 60% of 5% leaves us with, er, 3% of all funerals that are pre-planned by Dignity and Co-op.

      A diismaying trend; yes, but alarming from the point of view of business for the small fish? We may still have more time than we think.

      So, as Harry Harrison said: “Gentleman, relax your sphincters.”

  9. Charles

    Charles, I was glad to read this article I have copied the following text from the Sun Life Website, needless to say I am disgusted “You need to be sure you can pay your premiums until aged 90 or your death if sooner, as if you stopped the funeral services wouldn’t be provided and you wouldn’t get anything back. Depending on how long you live, the cash sum paid out to the Co-operative Funeralcare could be less than the total amount paid in premiums”.
    In the UK only about 5% of funerals are paid for in advance, compared to 50% in Germany and France. Funeral providers and insurance companies, need to provide more affordable pre-payment plans and develop products for the poorer families and people on low incomes.

  10. Charles

    I agree with all of the above! But clearly some people want to buy these plans – in my view, we independents should be very cautious about selling them.

    We have almost no control over the sellers nor future returns and are already being offered plan funerals at way below our current at need charge. If a client buys a plan from our business – having dealt with us despite our not ever having the money we may feel we had some obligation if anything were to go wrong?

    Whatever our feelings – small funeral directors need to be aware that the big players sell a lot of these plans – using their big budget advertising and ‘charity’ trading partnerships. Their considerable success will have consequences for us little people.

  11. Charles

    My only experience of someone who had a funeral plan was not good. Mr G had bought a plan from a large national chain ( let’s call them XYZ plc.) He died in a hospital away from his home and close to his NOK ( a distant godson.) Godson asked the nearest FD to undertake the funeral ( let’s call them ABC & Son.)

    ABC and Son began arrangements, booked the crem, booked a celebrant… Then NOK found Mr G’s paperwork and realised he had already paid for a funeral with XYZ plc. By now the godson had a relationship with ABC & Son and asked them to sort things out. …the plan was supposed to be transportable… XYZ Plc refused to do anything ‘before probate was granted’ – they even refused to reveal the choices made by Mr G in his plan regarding choices of ceremony, celebrant/vicar, music and/or hymns. This caused much distress to his godson because he felt he was planning ‘blind’. He decided to stick with ABC & Son and just pay again. Mr G had an excellent funeral service. It was frustrating though, that XYZ plc had information that would have eased the burden of the godson, but because he didn’t want his godfather ‘messed about’ and removed to their local premises, they played very awkward.

    I’ve given my NOK a cheque to deposit in an account and use it as they see fit when my time comes. If they choose to spend it on themselves, I’ll assume they needed it. If all it can buy is a simple cremation with no service, so be it – they can go for a swift half (or two) at the local hostelry and toast my memory. Keep it in the family!

  12. Charles
    Golden Charter Spokesperson

    There seems to be some confusion in that insurance policies are thought of as funeral plans. A Whole of Life (insurance) policy is not a funeral plan. It is a guaranteed cash amount, payable on death, which may be used to contribute towards a person’s funeral if they so wish.

    Usually, a person who takes out such a policy agrees to pay a fixed monthly premium until they turn ninety or until their death in some cases. The guaranteed cash sum that is paid out is agreed at the time of taking out the policy and remains the same.

    Funeral plans are fundamentally different in that they guarantee funeral director services at the very least and the money invested grows meaning the plan holder effectively combats inflation while the funeral director takes the risk that growth on the funds will mirror inflation and cover his costs.

    Essentially, with a funeral plan the plan holder pays for a funeral at today’s prices whereas with an insurance policy, you get a cash sum to help pay for a funeral at whatever the prices will be at the time of death of the policy holder. (This point alone makes a funeral plan vastly superior in value.) Some policy holders may be offered the choice of assigning their insurance policies to a funeral company. Keeping in mind that their cash sum is fixed it becomes important which funeral director is employed because they will have to pay the prevailing prices at the time of death. If, for example the plan was assigned to a conglomerate, they could on average be paying more as Independent funeral homes may be cheaper, Which? Magazine discovered this recently when researchers phoned funeral homes in 52 towns across Great Britain. Dignity provided the highest quote in 45 out of the 52 towns and had the highest price overall (£4,199) whereas Independent companies provided the most competitive quote in 36 of the 52 towns, offering the lowest overall quote (£1,700) for a cremation with the same specification.

    Funeral related costs have risen by an average of 7% a year according to the “Cost of Dying” report commissioned by Sun Life Direct. Hiding your money under your mattress or even investing in an ISA will not presently get the customer a 7% compound interest return a year. At the risk of repeating myself, funeral plans, at the very least, guarantee funeral director services at today’s prices.

    From a funeral plan provider’s point of view, funeral plans are being sold to secure future market share. Although the Independents currently enjoy 60% of the at-need market, they only hold 40% of pre-need. Every time a pre-paid funeral plan is sold by a competitor in your area, that is one less funeral your company will have the opportunity of undertaking in the future, and the conglomerates have been tipping that balance in their favour in recent years.

    Golden Charter is the only plan provider that is able to fight this battle nationally. As a company it is entirely owned by funeral directors and operates for the benefit of the funeral directors and the plan holders.

    The conglomerates hope to dominate the future market by selling pre-paid funeral plans and securing assignations of insurance policies just as they are attempting to shape everyone’s future by purchasing crematoria and by buying up independent funeral homes.

    Finally in response to the blog comment on the FPA (Funeral Planning Authority), it is true that funeral plans are not regulated by the FSA but by the FPA. It is quite common for many industries to self-regulate and this can be very effective. Registered members of the FPA must comply with the FPA rules and Code of Practice which can be found on the FPA website.

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