Best Funeral Plans: A thoughtful investment

If you don’t want to leave your loved ones with a financial headache when you die, then read on.

Sun Life’s Cost of Dying Report reckoned that the total cost of dying in 2016 was £8,802.  This is the average across the whole of the UK, with substantial regional variations.  Funeral costs represent the single largest item at an average of £3,897, with the cost of a send-off adding a further £1,972 and other professional services representing some £2,933.

Staggering Increases

The most significant fact that the annual Sun Life Report reveals is the staggering increase in these costs, particularly the cost of the funeral.

The projection for 2026 assumes that the current rate of increase continues, which is by no means certain, but the evidence suggests that it probably will do.

According to the Office for National Statistics, since 2004, the cost of a funeral has risen by 103%!  Compare this to the increase in insurance (76%); utilities (domestic) (70%); food (40%) and rent (38%).

In another article I have asked whether cash is still king and, clearly, money set aside for funeral costs and held in a Bank or Building Society account has substantially lagged behind the increasing cost of dying.  In fact, interest on savings has lagged behind Consumer Price Inflation, especially since 2004.  According to the Bank of England inflation calculator, £1,920, the average cost of a funeral in 2004, would have increased to £2,705.21 by 2016, at an average of 2.9% per annum.  Substantially less than the £3,897 actual average figure.

Is over 50s life assurance the solution?

Daytime television would have you believe that it is the solution, but is this right?

Sun Life advertises that they guarantee to be the lowest cost provider, so let’s look at some quotes for me, a 65 year old (in 2017).  There are two things we need to consider – when the pay-out is likely to be needed and the amount of cover required.

According to the Office for National Statistics calculator, my average life-expectancy is to age 86.

I’ll consider three levels of cover, as follows:

  • £3,897, being the current average cost of a funeral.
  • £7,049, being the projected cost in 2026.
  • £12,655, being the possible cost of a funeral in 2038, when I’m 86, assuming average funeral cost inflation of 5.5% (the increase between 2015 and 2016, according to Sun Life).

Based on Sun Life’s online quote calculator, the following is the outcome (cover being the nearest amount to the above targets):

Cover       Premium       Total Cost
£3,920         £21                  £ 5,292
£7,095         £37                  £ 9,324
£12,760       £66                £ 16,632

So, to get something that is realistically going to cover the cost of my funeral, I’m going to have to pay £66 every month for the rest of my life, a total of £16,632, if I live to 86.  If I put £66 per month into an account earning just 1% per annum, I’d have £12,822 by the time I was 79, so this only remotely looks like good value if I was to die significantly before my 79th birthday!

What is the solution?

In my opinion it is a pre-paid funeral plan.  Fairly self-explanatory, such a funeral plan involves either a one-of lump sum payment or a limited regular monthly contribution, which then guarantees to cover the cost of the funeral director’s services and provide an indexed sum towards the other costs, such as cremation or burial and the services of a Celebrant.

Is my money safe?

All leading funeral planning companies hold the money you pay securely in a trust fund, set up in conjunction with specialist solicitors, and that is overseen by qualified Trustees. With advice from leading investment managers, the Trustees invest the money and, over time, this money grows, ensuring that however long you live, there will always be sufficient money within the fund to cover the cost of the funeral director’s fees and services.

The Funeral Planning Authority regulates the providers and requires that the Trust Fund is audited every 3-years to ensure that it can meet its liabilities

How much does it cost?

Generally, you are securing the cost of the funeral at today’s prices and, consequently, protecting your loved ones from the increases referred to above.

Using the leading funeral plan provider that I recommend as an example, let’s compare the cost with Sun Life.  Taking a top-of-the range plan, the one-off cost in 2017 would be just £3,900 or, with instalments spread over just 120-months (to age 75), the cost would be £42.58 per month, a total of £5,109.60, including administration charges.  This is compared to £66 per month and, possibly, a total of £16,632 with Sun Life.  A no-brainer, methinks!

What’s next?

If you want to minimise the stress to your loved ones by securing a funeral plan tailored to your individual needs, please call me today, or complete the form below.

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About Clive Barwell

Clive Barwell is one of the most experienced and qualified financial planners working in the later life market today, he specialises in advice and guidance for the over 55s. To ask Clive a question, please email him at info@clivebarwell.co.uk. Alternatively, you can follow Clive on Twitter, connect with Clive on LinkedIn or see Clive's profile on Google+.