Funeral plans and the ‘peace of mind’ delusion

Charles Cowling

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It may be that the media are beginning to wake up to the inadequacies of pay-now-die-later funeral plans. The Times has a piece today which, chances are, you won’t be able to read online because you haven’t got a key to the paywall. So I’ll summarise. 

It highlights third-party costs that funeral plans generally do not cover — costs which cluster under the umbrella known formerly as ‘disbursements’ until the Dismal Trade cottoned on to the fact that no one outside the Trade uses the word ‘disbursements’; it may sound like a good and impressive word but is effectively Double Dutch. Undertakers: please stop using it. From now on, talk only of third-party costs. 

Funeral plan providers actually make it pretty clear what costs are covered and what costs aren’t, so there’s little excuse for surprises when the undertaker’s account flops through the letterbox — or, rather, there is no excuse for the person who has died not to have made provision for these costs in another way – by popping a grand into an Isa, for example. Buyers seem to be blinded by the peace-of-mind message common to all providers. We are disappointed to note that the Funeral Planning Services Liberty plan claims on its home page: 

With a Liberty funeral plan you can both choose your own funeral arrangements for your own peace of mind, and freeze Funeral Directors’ costs at today’s prices, saving your family from having to make difficult emotional and financial decisions in the future, and only on the Details page comes clean and makes you aware of: Option to contribute towards third party costs such as crematorium, doctors & clergy fees

Less justifiable is the sales trick used to stampede people into buying a plan. Yes, the cost of dying is rising by around 7 per cent per year. But most of this increase is not in undertakers’ costs, it is in the fees payable to third parties (once known as disbursements). 

The Times article has a swipe at Age UK, the ‘charity’ which, as we have had cause to deplore often, here, *flogs Dignity plans to trusting elderly folk. The Times correctly observes that these Age UK plans “tie families in to using an approved funeral director rather than a local, often cheaper, independent undertaker.” The ‘approved’ funeral director may well be based some distance from the person who has died. 

The Times piece correctly notes that funeral plans are not regulated by the Financial Conduct Authority. 

The article concludes with a case study that’ll make your lip curl: 

Ros Rhodes, 70, was shocked to receive a bill for more than £1,000 for her mother’s funeral, as she believed all costs would be covered by an Age UK funeral plan. Her 89-year-old mother had spent almost £3,000 on the plan 18 months previously.

The extra costs were even more perplexing because the undertaker’s account showed that he had been paid only £2,169 from Age UK — £571 less than her mother had paid the charity.

She says: “I have telephoned and written to Age UK to try and find why there was such a difference in the money paid in and the money paid out. I have been fobbed off with trust funds, expenses, inflation and other such terms that are of no real answer.”

After Age UK was contacted by Times Money it sent Mrs Rhodes a cheque for £750 as a goodwill gesture. The charity said that there had been a mix up with the bill and Mrs Rhodes should not have been charged so much, and also that she should not have seen the breakdown of the funeral director’s expenses. But Ros says had she not seen the breakdown, she would have never have queried the bill.

*The Age UK Guaranteed Funeral Plan is offered by Advance Planning Limited, a company incorporated in England and owned by Dignity Pre Arrangement Limited (a subsidiary of Dignity plc). Registered office: Advance Planning Limited, 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands B73 6AP. Registered in England, no. 3292336. — Source

 

 

 

 

 

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Stephen Pett
Guest

As one who has seen the impact of Regulation by the FSA and it’s successor, I can promise you the following results: 1) More expensive funeral plans. 2) Less independent advice. 3) Less inovation. 4) An industry controlled by well intentioned folk motivated soley by creating bad PR (they think destroying confidence makes them look successful!) who have no understanding of the value they are destroying. Since 1988, the need for financial advice has risen dramatically in a more complex world, and the population involved has grown substantially. The number of people available to give financial advice has been cut… Read more »

Stephen Pett
Guest

I forgot to mention the following FCA quirks: 1) They change the rules retrospecitively,so no one is ever secure. 2) They take 20 years or more to discover catastrophes which are obvious to most in the industry – for example, PPI – I was aware of the problem before 1988, but Regulators are apparentlyborn deaf. 3) They expect an individual in the industry to know MORE than their entire highly paid staff. 4) They are REALLY expensive, and who pays? CONSUMERS. Hit the auto destruct button if you want, but count me out! I would have no problem with a… Read more »

Roger
Guest

Great Blog always read the small print terms & conditions before you sign up !

John Crossley
Guest
John Crossley

Thanks Roger, I do not have a problem with these types of plans pursae I could have done with one very recentley. I just feel it is too sensitive an area that these companies should be regulated. I am sure the big players in this industry would welcome it and stop this flood of in my opinion inexperienced and possibly even crooked companies cashing in on our older generation. Afterall we are all heading that way thats the only certainty in this life. I just hope sites like this can draw enough attention to this situation before it getsout of… Read more »

John Crossley
Guest
John Crossley

The main problem with re-paid funeral plans is that it is not regulated by the FSA , and because of this anyone can just set up a funeral parlour or funeral plan trust, I mean anyone! it costs very little to set up a trust (I have done this myself for something else), find yourself a couple of like minded trustees, pinch someone’s website and advertising material (amend accordingly). Then you scoop your percentage (this amount is up to you there are no rules), funeral plan cost £3000 upwards, the funeral director gets between 1 and 2k so the rest… Read more »

Ruth Valentine
Guest

Andrew’s comment may be true; but it assumes that there’s nothing the rest of us can do to get the word about that funeral plans are A Bad Thing. It may not be easy; but the odd investigative finance journalist might get interested? Martin’s Money Tips? Radio 4 money programme? or even just a home-made leaflet called A Better Alternative to Funeral PLans?

Andrew Hickson (Kingfisher Funerals)
Guest

Does it really matter what they’re called? All most consumers care about is the bottom line – ie how much it costs. The only way to really make pre-need funerals fair on the client is to guarantee the cost at the time of need. That means putting the client before ourselves (as funeral directors) – something which only a handful of us are willing to do. Whether we like them or not, the corporates will be selling them by whatever means they can for a long time yet. If we independents don’t do the same, our market share will decrease… Read more »

David Holmes
Guest

Smoke and mirrors?

I will take your advice about ‘disbursements’ and change the description to ‘third party costs’ as soon as possible.

Like many funeral directors, I am not nor ever have been, a fan of pre-paid funeral plans.

Teresa Evans
Guest

Hear hear Poppy and Jed. Least by investing in oneself, if arrangements are changed there is no risk of losing often around £150+ in admin costs.

ian
Guest
ian

funeral plans are terrible unless you’re in a care home and have a lot of cash in the bank. I rarely advise people to take them out. problem is, in the long run as a business we’ll end up losing out…

Jed
Guest
Jed

Good point Poppy – I advised a friend’s aged parents to put their funeral money in a separate account and just inform their son of their wishes – or a friend, or their solicitor if they prefer.

Poppy Mardall
Guest

I might be rubbish at maths, but nothing is ever frozen at today’s prices is it? It’s just invested on your behalf, right? So why not invest it yourself?