Age Concern warns that they or their relatives could otherwise find themselves without enough money to meet funeral needs.
About 100,000 people in Britain have already taken out such plans, which aim to provide an inflation-proofed way to beat rising funeral costs by paying for them in advance. But lack of controls over how how the money spent on them is secured for the future means that potential buyers need to take extra care.
Age Concern said: 'Before buying a plan, it is important to know exactly what you are doing. Consumers need to be absolutely confident that the future cost of the funeral will be covered. A few questions now will give you peace of mind later.'
The charity recommends ensuring that any money spent on a plan goes into a trust fund, with independent trustees, so that it is kept separate from the funeral planning company's other assets.
Buyers should also check that they know what they are getting for their money, including a specified funeral director, all cremation fees, portability of their plans wherever they move, and full refunds if necessary.
Age Concern's warning follows the collapse last month of a Huddersfield company, Will Writing Services, which sold funeral plans. Dozens of elderly people who paid for plans through the company are thought to have lost up to pounds 1,000 each.
Because their money was not held in a separate trust fund, it could be used to pay off the firm's creditors instead of being returned to them.
The Society of Allied and Independent Funeral Directors, a small trade organisation for independent funeral directors, has issued advice for the public.
It includes ensuring that in the event of a plan being cancelled, the refund covers the cost of a similar funeral and not just the original sum paid.
A larger organisation, the National Association of Pre- Paid Funeral Plans, has issued a 12-page code of practice, agreed with the Office of Fair Trading. Any member who infringes the code may be expelled or fined up to pounds 1,000. If clients are unhappy, an independent arbitration service is available.
The association's spokeswoman said: 'It could be argued that there has been a free- for-all in the past. We want to the public to be reassured by reputable companies.'
The OFT said it had not so far received evidence that the pre-paid funeral system had been abused. 'We are concerned, however, that the potential for abuse of such schemes may exist.'Reuse content