Pre Paid Funeral Plans

jopotter

In 2016, my mother purchased a prepaid funeral plan over the phone with the Co-op without receiving adequate advice, leading to we think, an mis-sold plan. She has been contributing £41 monthly for a decade, totalling over £5,000. Having decided on a funeral that costs well within this amount, she requested the Co-op to either cease or reduce her payments. However, they refused, stating that cancelling the plan would result in the loss of all paid funds, and she must continue payments until her death or until she reaches 90, as she is currently 78. After her complaint to the Co-op was dismissed, citing the terms of her contract, she escalated the issue to the ombudsman. The ombudsman sided with the Co-op, affirming that these were the terms she had agreed to. The issue at hand is not only the advice provided at the time but also whether she is obligated to continue payments, and if the funeral costs are less than the amount paid, who is entitled to the remaining funds. If the Co-op retains the overpayment, what happens to the funds?

la531983

How is it "theft" when it was an agreed contract and you have now had the independent body side with the Co-Op?

Isthisforreal99

It's ludicrous making allegations of theft. Sounds like many of these tyoes of over 50s plans where they are mis-bought rather than mis-sold and you will pay in more than you get out. Now it's a decision, stop paying and lose the cover or continue.

It does sound different to the pre-paid plans now being advertised where you pay a fixed amount but time to look at the paperwork but the fact FOS did not uphold the complaint suggests she got exactly what she bought.

user1977

It's an insurance product, it isn't "theft" to keep the premiums just because you haven't claimed within the period of cover.

Technosaurus

A common complaint with funeral plans I'm afraid - there's an element of 'gambling on when I might die' as to how long you pay in. If you watch the adverts on daytime telly the small print always says "you may get out less than you put in" - It is a case of "buyer beware"

Worth pointing out that £5k might be about right on current average pricing:if you did, god forbid, need to pay for her funeral in the not too distant future. This of course depends on where you live and assuming she wants a cremation with limo, flowers etc, but it's not far off the average cost. (If she wants a burial it's actually probably saving money)

And it going up 10% / £492 per annum is not too far off for the real cost of inflation in the sector - as in I would expect a funeral next year to cost about 8-10% more than today, assuming fuel and energy prices stay high. There will come a point where it's perhaps more than you would need but it's not quite the major cash grab it might seem at first reading.

Simply cancelling the plan once a certain amount has been reached is not how the products are designed - it will go void and all the money will be retained. So she CAN cancel whenever she likes, but you will kiss goodbye to all the money put in up to now and have to start again somewhere else.

The Coop are one of the better providers in terms of adherence to regulation and their own internal policies, so the burden of proof would need to be on your Mum for any allegations of mis-selling. For the Ombudsman to find they are 'not guilty' implies there has been no foul play.

flaneurs_lobster

This type of plan is like a life insurance policy that pays a set amount on the death of the policyholder.

If the policyholder dies having only paid a few premiums then the policy still pays the agreed amount.

Conversely, payments must be maintained beyond the point where the premiums paid exceed the payout if that payout is to be made at some point.

Would it have been 'theft' if the plan had been activated after six months of it being started?

QrizB

she must continue payments until her death or until she reaches 90, as she is currently 78.

90 looks to be average life expectancy for a 78yo woman, per ONS.

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

In 2016, my mother purchased a prepaid funeral plan over the phone with the Co-op

She will have been 68 in 2016, with an average life expectancy of about 88. So she should have known that she'd be paying into this scheme for 20 years, on average.

Keep_pedalling

As with all insurence there are winners and losers. Had she died 6 months after taking out the plan her estate would have benefited as a full funeral would have cost just £246. The premiums are high because no medical required and they can be taken out by people with limited life expectancy.

The positive take on this is that she is a winner in the longevity stakes even if a loser on the insurance.

jopotter

Thanks everyone especially Technosauras and Keep Pedalling for the more balanced replies. I will pass on your comments so Mum has a better understanding of the terms she signed up to.

lincroft1710

She may live for another 10 years, paid around £10,000 for the plan and by that time a funeral could cost £12,000!

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82162755#Comment_82162755

Also the monthly premium is fixed, so its real value is dropping every year.

£41 in 2016, is worth only £25.67 today.