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Money Matters – The end of funeral firm R.I.P-offs?

Paul Lewis

1 October 2021


Paul Lewis is an award-winning financial journalist and broadcaster.

Consumers can be vulnerable when it comes to funerals. New regulations will help, says Paul Lewis.

The funeral industry is being told to clean up its act. Since last month, prices must be explained clearly and in a standard way to allow comparisons to be made by relatives looking for a suitable deal.

And from the end of July next year funeral plans, which enable people to pay in advance for their own funeral, will be more strictly controlled.

This is how the measures will change funeral planning:

Prices

All funeral firms must now display their prices clearly and in a standard format. That applies to price lists on their premises or online. The list must include the headline price of a basic funeral and a breakdown of the cost of each individual service, such as viewing the deceased, collecting and moving the body, providing a coffin, and travel to the funeral itself. It must then list additional services with their prices, such as embalming, a priest or celebrant, cars for mourners and any additional fees. That should enable people to compare the cost of local funeral directors and pick the ceremony they want at a price that suits them.

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These changes are part of what the Competition and Markets Authority (CMA) calls ‘sunlight remedies’ – throwing light onto some of the darker corners of the industry which it says can exploit people at an emotional and stressful time.

The CMA has also banned funeral firms from paying commission to hospices or care homes that recommend them to relatives after a patient dies. That will avoid the danger of distressed relatives picking a funeral director who is poor value but pays the biggest backhander.

From 29 July next year, cold calling to sell funeral plans will be banned

Funeral plans

A few weeks after the CMA set out its price controls another regulator, the Financial Conduct Authority (FCA), announced plans to control the near £1 billion annual market in funeral plans. Most big firms offer these and sell them as a way to fix prices at today’s level and take the worry off the shoulders of distressed relatives. It sounds attractive and 160,000 people bought one in 2020. But they can be poor value for money as the promises about what they provide are not always met. The new rules are designed to protect consumers.

From 29 July next year, cold calling to sell funeral plans will be banned, as will commission payments to agents who introduce customers to firms that offer the plans. The FCA found that nearly one in three of the customers it asked said they had been subject to high-pressure sales. The authority is concerned that some plans, which people have bought and perhaps paid into for many years, may not provide a suitable, fully paid for funeral when they die. In future, plans will have to guarantee that.

Sheldon Mills, executive director for consumers and competition at the FCA, says, ‘It is possible to have a competitive market that meets customer needs, earns firms a profit and provides value for money.’ However, some of the 1.5 million people who have already bought a plan before those rules begin could find themselves without a plan at all. Where a firm fails the FCA tests or decides to leave the market, it should try to find a regulated firm to take them over. However, in some cases that may not be possible. The FCA admits that those firms will at best refund customers and in some cases, there may not be enough money to pay back all that was paid in.

Funeral insurance

Over-50s life insurance is widely advertised on daytime TV and in the press, promoted by celebrities who, in some cases, should be able to do the arithmetic that shows these plans are very bad value. The stark fact is most customers will pay in more than their relatives get out when they die.

For example, one well known firm charges a 66-year-old £20 a month for a policy that promises £3,712 on their death. It is not hard to work out that after 151/2 years the individual will have paid in slightly more than £3,712. A 66-year-old woman will on average live until she is 87, by which time she will have paid in for 21 years and for the last five or six years of her life the £20 a month she pays will buy nothing. On average she will waste £1,328. The longer you live the more you waste. And if you cancel the plan the firm simply keeps all you have paid in and will not pay out. Men live a shorter time but even for them the chances are they will pay in more than their loved ones get out. That is why these plans require no medical – the insurers know that overall, they will win the bet on how long their customers will live.

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Let relatives pay

Funeral plans and over-50s insurance are generally bad value. But with even a basic funeral costing around £4,000 it is understandable that people worry about who will pay. If you leave behind enough money and property to pay for your own funeral, then your loved ones who will inherit can decide for themselves what to spend on seeing you off. Funerals are, after all, for the living not the dead. If some of your money is in cash your executors should be able to get access to it to pay the bill. If not, any respectable funeral director will wait until your estate is wound up and the executors have the money to pay.

If you will not be leaving enough to pay for your funeral, then it is doubtful you can afford to buy a plan or gamble on over-50s life insurance. Most relatives would rather you spent the limited funds you have to support yourself in your final years – and pay for your funeral themselves.

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Article first published in Saga Magazine October 2021

The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.