It's your funeral, so don't let the costs rise too high
As cremation and burial expenses soar, Nargis Ahmad and Julian Knight report on the prepayment plans that can help protect your legacy
Sunday 23 November 2008
We may think the cost of living imposes a huge strain on our wallets, but what about the cost of dying? From undertakers' fees to crematorium costs and burial plot prices, the bill for being laid to rest or cremated is soaring at well above the rate of inflation.
It costs an average of £2,549 for a cremation and basic funeral service in the UK. But if you are planning something a bit more formal, the expense can be far higher. If you want to be buried, for instance, the average bill rises markedly to more than £4,000, according to insurer AXA Sun Life.
What's more, funeral costs, as with most things in Britain, can vary according to where you live. London, not surprisingly, is the priciest area because burial land is expensive and undertakers tend to have higher staff costs and other overheads. Indeed, a burial in the capital can be nearly twice as costly as one in parts of the north of England, Wales and Scotland.
In many cases, the departed will have set aside money in their will to cover the costs of a funeral. However, this will often prove an underestimate and the excess will have to be found from reduced legacies or perhaps a surviving relative's pocket.
Another option is to buy life insurance. This pays out a lump sum on death to the estate of the deceased, and part of it can be used to cover funeral expenses. The drawback with a life policy is that, with increased longevity, people can end up paying premiums for many years
A more straightforward alternative and one widely used in France and Germany, is to go for a prepaid funeral plan. Put simply, the individual buys a policy through either a one-off lump sum or monthly contributions. The payment schedules can vary, with some funeral parlours specifying that premiums should be paid within a year or two. People looking to spread their payments over a longer period can be hit by interest charges.
Some providers, however, offer continuous payments. The Co-operative, for instance, guarantees to meet the costs of the funeral for as long as the monthly premium is paid. The charges are based on your age, gender and location. As a rule, females pay a smaller premium as they have a higher life expectancy, while the further north you are, the lower the premiums tend to be. Generally, premiums are higher for people who are older.
But no matter which option you take, one message is very clear: the costs of funerals are rising.
"Currently they are going up by around 7 per cent a year, which is comfortably above inflation," says Mark Howes, the managing director of AXA Direct. "The basic funeral plan will include the cost of cremation, a casket and the death certificate, but there are other things that may not be covered, such as transportation for relatives in a limousine, a headstone and the cost of a wake. When you add in probate and legal fees, this can mean several thousand pounds," he says. "So make sure you know what the plan will give you at the point of need, and budget for the limo and wake if you want to include these."
"Disbursement costs" must also be taken into account. This term refers to all items and services that are supplied by someone other than the funeral director. Common disbursements include the doctor's fee for signing off a cremation, clergy costs, and crematorium or church charges.
All those extras are worth considering carefully as recent research by Mintel shows that disbursement costs can add as much as £2,000 to the price of a funeral. "We have no control over third-party costs," says Dominic Maguire from the National Association of Funeral Directors. "Crematorium charges have gone up as crematoriums have to follow European legislation on reducing mercury output, and we have had to pass these charges on to customers. Also, doctors now have freer rein over what they charge for a death certificate."
However, many of the funeral plans available on the market include a contribution to these third-party costs. Often, a payout figure is outlined in the policy document at the outset and this rises in line with the retail price index over time. But with funeral costs currently beating inflation, it is possible with most plans that when the funeral does take place, there will be a balance to pay. In addition, the longer you hold the plan, the more likely it is that the disbursement costs will escalate away from what the plan actually pays out.
The Co-op, among other providers, offers the option for people to tailor a funeral to their own specifications, such as arranging for a horse-drawn hearse or a particularly expensive coffin. In return for a higher premium, the plan should pay out enough to cover these extra expenses.
But above and beyond all this, people looking at funeral policies need to ask themselves a whole host of questions. "Does the plan allow you to choose the funeral director, or does it have to be the person the insurer decides upon?" asks Robin Gordon-Walker from the Financial Services Authority. "And will it cover expenses outside the plan?
"It's also worth asking about the cancellation policy and charges. And it's good advice to tell your family in advance, have a written record and make sure that the next of kin knows."
In uncertain financial times, another consideration is how safe your money will be once you have paid it to the funeral parlour or insurance company.
If you are considering buying a plan, it is worth checking that the company is a member of the Funeral Planning Authority, because under FPA guidelines, companies must put the money in a trust. That will ensure it is safe even if the firm goes under.
There can be occasions when a family will pay for a deceased relative's funeral costs unaware that provisions have already been made through a prepayment plan. But Mr Maguire at the National Association of Funeral Directors says some providers have a failsafe: "If the family hadn't realised there was a funeral plan, all they need do is get the death certificate and present it to the funeral provider, and the money will be paid back to the deceased's estate."
However, some financial experts argue that tying up money in a pre-paid funeral plan, although providing peace of mind, can represent poor value. Instead they advise people to pay into a savings account or other investment vehicle early on in life; over time, it should put on enough value to pay for the funeral.
Rain doesn't stop profits at Andy Murray's £600-a-night hotel Cromlix House
Think twice about investing in fine wine - it's a vintage ploy for the fraudsters
Santander's Kitti app aims to bring the good old cash kitty into the 21st century
Five Questions On: GB Energy's new tariff
Bank-beating exchange rates on your international payments
- 1 Edward Heath 'raped 12 year-old boy at Mayfair flat'
- 2 Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
- 3 Porn block in India: hundreds of sexual websites banned, internet outraged
- 4 Gwen Stefani and Gavin Rossdale divorce: One of music industry’s most enduring couples announce split after 12 years of marriage
- 5 A-level results 2015: UK exam board OCR admits it 'estimates' hundreds of pupils' grades after papers 'go missing'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...
£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
Day In a Page
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.