Funeral plan investments 400% better value than a cash ISA

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Pre paid funeral plans offer a sensible investment given the price rises since 2011 but not all products are the same. Here are some tips for anyone looking to identify a safe, good value funeral plan investment.

The phrase ‘you can’t spend it when you’re gone’ is often used to encourage people to relax their purse strings a little and enjoy life while they still can.

Unfortunately, when it comes to funerals, we know that someone will have to foot the bill when the time eventually comes and, with the cost of funerals rising at four times the rate of inflation[1], that could leave our families with a potentially difficult financial situation.

This dramatic increase in funeral prices has led to 200,000[2] people a year taking out funeral plans to protect their families from a potential difficult financial situation. An independent report[3] by Fairer Finance concluded that, because they lock into the cost of a funeral at the time of purchase, funeral plans can provide a good financial investment.

So what are the figures? Well, the cost of a funeral has been increasing at an average of 5.45% per year since 2011[4], while the current best value easy access ISA currently has a rate of only 1.3%[5].

So while in 2017 the average funeral cost £4,086, if that price continues to increase at the same rate that it has for the last seven years, then it will reach £5,924 by 2024[6]. The Dignity Funeral Plan Savings Calculator suggests that anyone investing that money in an ISA today could be left £1,171 short for the average funeral by 2024, whereas if they were to put their money into a Funeral Plan, they would be fully covered.

The Fairer Finance report acknowledged that while Funeral Plans represent good value for money, a lack of regulation and consumer protection in the industry means consumers should do their research to avoid getting stung. Here, Dignity Funerals, who commissioned the report and whose Diamond plan has a Defaqto five star rating, put together tips for anyone looking to identify a safe, good value funeral plan investment.

Find a provider who is registered with a recognised regulatory body

When you’re looking to take out a prepaid Funeral Plan, it’s important to see if they are registered with a professional body, like the Funeral Planning Authority (FPA). The FPA is one of the recognised regulatory bodies that regulates providers of Funeral Plans in the UK to ensure that customers get the funeral they paid for, when it is needed. Any business registered with the authority has to operate in line with a set of Rules and a Code of Practice that protects the interests of customers.

Read through the fine print

All funeral providers work differently and it’s important to read through the fine print to ensure quality of service is guaranteed when it comes to your funeral. Some Funeral Plan providers arrange the funeral plan and then the funeral is sub-contracted to an independent funeral director, while others have their own dedicated team of funeral directors as part of their company. Understand the type of product you are buying and be sure to ask what’s included.

Ensure your money is protected

Many of us hope to take out our funeral plans many years before our actual funeral, therefore it is important to ensure that your funeral will still be protected in the future and to check if anything could be subject to change. Look at where your money will be placed; companies that invest your money into a secure trust fund represent a safe option.

Will the Plan move with me?

Not all plans are portable and if you’re likely to move house before your funeral, it could impact your policy. Looking for a provider with funeral directors nationwide will give you extra flexibility and reassurance. It’s important to know you’re guaranteed the same high quality of service and care wherever you go, and that there won’t be a cost for moving your plan.

Sharing your final wishes

Documenting funeral wishes such as whether you’d prefer a burial or cremation or if you have any special requests such as songs to be played at the service will protect those left behind from having to make difficult decisions when the time comes.

If you opt for a prepaid funeral plan, you can document your wishes and change your preferences as many times as you wish, giving you the comfort of knowing that everything has been organised. Some providers such as Dignity allow you to do this for free, while others only let you document these special requests once, and charge for subsequent changes.

Sources

[1] Based on the Money Saving Expert ‘best cash ISA’ listing of 1.3% being the highest rate for an easy-access ISA and the cost of a funeral increasing by an average of 5.45% per year

[2] https://www.fairerfinance.com/assets/uploads/documents/Funeral-plan-report-FINAL-6-July-2017.pdf

[3]https://www.fairerfinance.com/assets/uploads/documents/Funeral-plan-report-FINAL-6-July-2017.pdf

[4] https://www.dignityfunerals.co.uk/funeral-plans/what-is-a-funeral-plan/funeral-costs/

[5]www.moneysavingexpert.com/savings/best-cash-isa

[6] https://www.dignityfunerals.co.uk/funeral-plans/what-is-a-funeral-plan/funeral-costs/

 

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