- Someone who puts aside £3,900 might end up with just £2,300 to pay for a funeral
- Salesmen often take hundreds of pounds
- Prepayment plans can offer good value if you pick wisely
A prepayment funeral plan can take much of the worry out of financing a send-off – but almost half the money paid out can be pocketed in administration fees and commission.
According to research by The Mail on Sunday, someone who puts aside £3,900 – the average cost of a funeral – might end up with just £2,300 to fund it after £1,600 is gobbled up in charges.
The provider might then hand over up to £800 of its cash share as payment to a salesman.
Warning: Prepaid funeral plans can offer value, but some gobble up hundreds of pounds in fees and commission payments
John Taplin, a director at provider Open Prepaid Funeral Plans, says: ‘High-pressure sales techniques are being used to push products where hundreds of pounds are creamed off in high administration fees and commission.
‘We need far tougher regulation to crack down on the practice and clarity so people can see where all their money is going.’
Website My Funeral Matters found plan provider Avalon was one of the worst offenders, pocketing up to £1,600 from a contribution of £4,000. But Dignity is not far behind – in some cases grabbing up to £1,500.
Golden Charter takes up to £1,350, Safe Hands £1,100, Pride Planning £1,045 and Golden Leaves £785.
Out of this ‘administration’ pot Pride Planning pays the most commission to third-party salesmen – handing over £800 for finding a customer. Golden Charter, Golden Leaves, Avalon and Safe hands pay up to £600 in commission while Dignity can offer £500.
But it is important to be aware that pre-payment plans can still offer great value if you pick wisely – as they offer the chance to pay for a funeral in the future at today’s prices.
With the cost of funerals almost doubling over the past decade there is a value in taking out such a plan.
Warning: John Taplin says hang up on cold callers who try to sell a product rather than a tailored service
There is also a cost to pre-payment providers, as they must put the customers’ money into trust – ensuring the money is safe even if the firm later goes bust. They also carry the risk of rising funeral costs.
Yet Taplin points out that taking a pre-payment plan from a provider such as Open Prepaid Funerals only costs £395 with all the extra money going towards the funeral. Independent funeral directors also offer pre-paid plans for similar costs.
Taplin says: ‘Only buy a plan directly from a funeral director or plan provider. Hang up on a cold caller who is simply trying to sell you a product rather than offering a valuable tailored service.’
Joseph Barsby, of family funeral director G Seller in Hinckley, Leicestershire, agrees that there is too much greed in the pre-paid industry.
Sales: Dignity and Avalon both pay commission to third-party salesmen
He says: ‘We recently had a family coming to us where more than £4,000 had been put into a funeral plan – yet they found that they would only receive about £2,000 to pay for the funeral.
‘It is simply unethical taking advantage of people when they may be feeling vulnerable.’ He adds: ‘My advice is to go to an independent funeral director and take out a plan with them.
We charge a total of £249 for plans and every penny after that goes towards the funeral. It also makes it easier as you can choose the tailored service that you would like.’
He also suggests keeping details of funeral requirements with a local undertaker and close family as a will kept with a solicitor may be read too late.
The National Society of Allied and Independent Funeral Directors can provide details of your local independent director. Those who feel uncomfortable with going to the premises can call them and arrange a home visit or even meet at a local coffee shop if they prefer.
Self-regulated industry watchdog the Funeral Planning Authority started restructuring last month. This involved kicking out board members with links to the funeral companies and putting in independent members.
Graeme McAusland, chief executive of the FPA, says: ‘When taking out a pre-payment funeral plan consider using one of our registered plan providers. We are working hard to ensure there is greater clarity in the industry.’
Funeral chain Dignity published a 70-page report on pre-paid funeral plans last week written by consumer website Fairer Finance. It found most of those targeted with pre-paid plans are unaware the policy taken out may not cover all funeral costs.
Simon Cox, of the 850-strong chain Dignity, says: ‘We need to clean up the industry and get rid of aggressive sales techniques. The amount we take in admin fees is partly to ensure we are future-proofed against rises in funeral prices.’
How schemes work and how to reduce costs
Pre-paid funeral plans
Policy-holders either pay a lump sum or make interest-free monthly instalments for usually a year – up to perhaps £4,000.
Some are all-inclusive while others offer the option to pay separately for cremation and burial fees – the costs most likely to rise most sharply in the future.
Make sure you know exactly what you are paying for and the details of administration costs and commission.
It is possible to tailor the funeral when taking out a pre-payment funeral plan – picking the music, coffin and perhaps burial in a quiet woodland plot.
Go to an independent funeral director or low-cost pre-payment plan provider – and never agree to pay a cold-calling salesman offering a plan.
A separate type of plan used to fund funerals is a whole-of-life life insurance policy – usually targeted at those aged over 50.
Some, such as the Guaranteed Over 50 Life Insurance by SunLife, lure customers in with celebrity endorsements or free gifts, such as a £75 voucher to shop at Marks & Spencer.
With premiums starting at less than £4 a month they can look fantastic value and pay £2,500 towards your funeral bill.
But beware that if you miss just a single premium, the policy could be null and void – and you will probably get nothing back.
Live a full and long life, past the average life expectancy of 82, and you might also end up getting back less than is put in during retirement years.
The whole-of-life over-50s insurance policy industry is regulated by the independent watchdog the Financial Conduct Authority.
Cutting the costs
Most people opt for a cremation rather than burial – costing between £300 and £750 depending on when it is booked.
Early morning slots tend to be less popular so can save you money.
A burial plot is likely to cost at least £800 so is going to be more costly than a cremation.
A hearse may cost £200 but additional cars for mourners will cost extra and are not always necessary.
An eco-friendly coffin made of cardboard can cost as little as £100 – compared with a wooden veneer casket for £300 or solid oak costing £2,500.
Newspaper notices, flowers, church hire and headstones are other options you may not need.
Cutting out any ceremony – service, hearse and coffin – and opting for a ‘direct cremation’ can reduce the cost to as little as £1,000.
Relatives later pick up the ashes in a simple urn and can hold a celebration to remember the life of their loved one at a later date.
The Natural Death Centre offers free guidance on planning a funeral and shows ways to cut costs.
Courtesy: Daily Mail Online