Planning ahead is one way to make things easier for the people you leave behind. Funeral arrangements are often overlooked, yet they can raise difficult questions and costs at a hard time. This guide explains prepaid funeral plans: what they are, how they work, the protections now in place, and the alternatives, so you can decide whether one is worth considering.
A.D.E. Wills does not sell, recommend or advise on funeral plans or insurance. This guide is general information only. If you want advice on how to pay for a funeral, we can refer you to an appropriate professional.
What is a prepaid funeral plan?
A prepaid funeral plan lets you choose and pay for a funeral in advance. Depending on the plan, you pay at today’s prices for the services the plan covers. As a result, it can help your family know what you wanted and reduce the cost they face.
How do prepaid funeral plans work?
Most plans follow a similar process:
- You choose a plan that suits your wishes and budget.
- You pay the plan provider, either as a lump sum or, with some providers, in instalments.
- The provider holds the money, usually in a trust or through a whole-of-life insurance policy.
- When you die, your family contacts the plan provider.
- The provider arranges the funeral as set out in the plan.
Plans usually cover the funeral director’s services, care of the person who has died, a coffin and transport. Some also include extras such as limousines or a celebrant. However, many plans do not cover third-party costs in full, such as cremation or burial fees, a burial plot or a headstone. So, always check what is included and what is not.
Regulation of funeral plans
Since 29 July 2022, prepaid funeral plan providers must be authorised and regulated by the Financial Conduct Authority (FCA). This brought in rules on how plans are sold and how customers’ money is protected. It also gave customers access to the Financial Ombudsman Service and, in some cases, the Financial Services Compensation Scheme.
Before you buy, check that the provider appears on the FCA’s Financial Services Register. Also, read the terms carefully, including what happens if you cancel or miss instalment payments.
Pros and cons of prepaid funeral plans
Possible advantages
- the services covered by the plan are fixed at today’s price
- your family knows what you wanted
- it can reduce the financial pressure on your family
- many plans allow payment in instalments
Possible disadvantages
- you pay up front for something you will not use for many years
- some costs may not be covered and could rise
- instalment plans can cost more overall, and missing payments may affect the plan
- there can be less flexibility if your wishes or circumstances change
What if you do not have a funeral plan?
Without a prepaid plan, funeral costs are usually paid from your estate. Banks will often release money from the account of someone who has died to pay a funeral bill directly. However, family members sometimes pay first and recover the cost from the estate later. Funeral costs vary widely depending on where you live and the type of funeral. So, it is worth getting quotes from local funeral directors, who must now publish their prices.
Alternatives to prepaid funeral plans
A prepaid plan is not the only option. For example, other common routes include:
- savings set aside for a funeral, which are flexible but may not keep pace with rising costs
- over-50s life insurance, which pays a lump sum, although total premiums can exceed the payout
- recording your funeral wishes, which does not cover the cost but makes your wishes known
Each option has different costs and risks. A.D.E. Wills cannot advise on which is right for you.
Recording your funeral wishes in your Will
As professional Will writers, we can record your funeral wishes in your Will, or in a Letter of Wishes alongside a Will we write for you. For example, you might set out:
- whether you prefer burial or cremation
- the type of service you would like
- music or readings
- charity donations instead of flowers
- whether you have a funeral plan, and where the paperwork is kept
Funeral wishes are not legally binding, but they give your family clear guidance. Also, because a Will is often read after the funeral, it is important to tell your family and executors about your wishes too.
Is a prepaid funeral plan right for you?
This is a personal decision. It depends on your age, health, finances and family. If you are considering a plan, compare several providers and check they are FCA-authorised. You may also want independent financial advice.
Next steps
Whatever you decide about a funeral plan, recording your wishes is a thoughtful step. If you would like to include funeral wishes in a new Will, with a Letter of Wishes if you would like one, call 01865 507174 or email info@adewills.co.uk. You can also read more about our Wills, or GOV.UK’s guidance on making a Will.
