Pre Planned Funeral - Golden Charter?

Malthusian

geminilady wrote: »

The money in these plans is always protected usually in a trust fund.

It's not always FSCS-protected, which is crucial. The money should be ringfenced, of course, but the same was true of Farepak.

The main thing in their favour is you agree a set price but if you live another twenty years or so the cost of a funeral would be lots more than what you pay today

If you have money that you're not going to spend for 20 years there's nothing to stop you investing it sensibly, in which case the value of your money should in theory keep pace with funeral costs, although there's no guarantee that funeral costs won't rise more than investments. If sheramber looked at how much her sister's £1,500 would be if she'd instead invested it in a stockmarket tracker fund many years ago (however long ago that was), I suspect it would compare very favourably with current funeral costs.

Funeral plans fall into the same category as over-50s life insurance. They exploit a psychological urge rather than an actual financial need.

sheramber

Malthusian wrote: »

It's not always FSCS-protected, which is crucial. The money should be ringfenced, of course, but the same was true of Farepak.

If you have money that you're not going to spend for 20 years there's nothing to stop you investing it sensibly, in which case the value of your money should in theory keep pace with funeral costs, although there's no guarantee that funeral costs won't rise more than investments. If sheramber looked at how much her sister's £1,500 would be if she'd instead invested it in a stockmarket tracker fund many years ago (however long ago that was), I suspect it would compare very favourably with current funeral costs.

Funeral plans fall into the same category as over-50s life insurance. They exploit a psychological urge rather than an actual financial need.

But she has not had to consider how or where to invest. What would investment advice have cost her? It has been taken care of for her. That is her choice.

What ,hat her £1500 may be worth now may not be enough to cover the escalating costs of her funeral wishes,

At least, this way, she knows she can have the funeral she wants.

badmemory

I bought my funeral from the co-op a couple of years ago & the price I paid was the same as it would have been if the funeral was going to be the next week. They even made a note of something I wanted them to say to my son. Of course I will never know if they do actually say it! But some of these plans do not seem to have the clarity that the co-op ones do.

oldhaggis

I bought a funeral plan about 6 years ago on behalf of an elderly relative for whom I had power of attorney. The relative's bank had been most unhelpful and had (incorrectly) told me that they would not release funds to pay for the funeral when the person passed away. They told me I would have to pay for it with my own money and then claim it back from the estate, which is totally incorrect. I decided to buy a silver cremation co-op funeral plan, which covered the funeral/cremation costs plus one car. I was informed at the time of purchase that this did not cover the printed orders of service and the services of an organist if required.
When the relative passed away all the arrangements worked perfectly.

Malthusian

sheramber wrote: »

But she has not had to consider how or where to invest. What would investment advice have cost her?

If she didn't take regulated advice when buying the funeral plan (which she almost certainly didn't) that's irrelevant as it's not like for like.

What was the cost of the funeral plan, which is the difference between the return the provider made by holding onto her money for however long, and the rate of return they gave her by paying for the funeral? Not disclosed. But probably much higher than the c. 0.5% a year a non-advised investment fund can typically cost.

At least, this way, she knows she can have the funeral she wants.

That's what I said, sub-optimal solution pressing a psychological button rather than filling a real financial need. "Will your loved ones be able to pay for your funeral when you die? No, don't look in your bank account, just buy this thing now and we'll throw in some M&S vouchers."

oldhaggis wrote: »

I bought a funeral plan about 6 years ago on behalf of an elderly relative for whom I had power of attorney. The relative's bank had been most unhelpful and had (incorrectly) told me that they would not release funds to pay for the funeral when the person passed away. They told me I would have to pay for it with my own money and then claim it back from the estate, which is totally incorrect.

Only if the employee got their bank's policy wrong. While the costs of a funeral can be claimed from the estate (as the bank said), banks are not obliged to release money for funeral costs prior to probate being granted, even though many will.

Malthusian

Just to expand on the above: say I've got £10,000 in my bank account and I want a pretty elaborate funeral that today would cost me £10,000. But, although I can't predict this, in ten years' time when I die the same funeral would cost me £12,000, and if I do nothing I'll only have £10,000 then. So I should use my £10,000 to buy a funeral plan which will pay the £12,000 cost in 10 years' time, right? Wrong! That would be the act of a complete chump because now I've got no money to provide for my own needs.

So perhaps if I've got £15,000 in my bank account I should buy one, as now I'll still have enough money in my account to serve as an emergency fund while still being able to afford a funeral plan? No, because now I don't need a funeral plan. The emergency fund to provide for the car breaking down or other unforeseen expenditure, combined with the money I would have used to buy the funeral plan, also acts as a cushion against rising funeral costs.

What if I spend £6,000 of that £15,000 and when I die my funeral plans are unaffordable? Then I definitely shouldn't have bought a funeral plan as I wouldn't have been able to meet my own needs.

Even if I dump all my money in cash, even that £10,000 that I've decided I'm never going to spend in my lifetime (which is poor planning), the chances that a sum sufficient to provide for my own needs + a sum sufficient to buy the funeral I want today becomes insufficient to buy the funeral I want in the are minimal. If I have enough money in my bank account that there will be plenty left over to serve as an emergency fund, even after spending a large chunk on it on a funeral plan, then I don't need one. If there wouldn't be I can't afford one. There are too few scenarios which break this paradox to sustain an industry for funeral plans.

If preserving my emergency fund for my heirs is the aim (i.e. ensuring that the higher funeral costs don't eat into the £5,000) then investing the £10,000 I've already decided I won't ever spend is a much better solution.

There's a reason these plans are sold solely via non-advised channels (in some cases via cold calling). Psychological button-pushing sales product rather than real financial need.