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.
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Questions of Cash: Why was my case ignored by My Civil Service Pension?
Offset your mortgage and save thousands
Women to lose benefits from contracted-out pension scheme
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Yorkshire man to win £10,000 off a £1 bet placed six years ago if Dan Jarvis becomes Labour Party leader
- 3 Vladimir Putin says Russia will fight for the right of Palestinians to their own state
- 4 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 5 The West has it totally wrong on Lee Kuan Yew
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
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.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
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.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
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
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station