About 1.3 million people in the UK have one of these plans, and it’s a rapidly growing market, with more than 200,000 sold last year. They are typically bought by older people to cover the cost of their funeral so their family doesn’t have to pick up the bill.
But this is a controversial sector. Worryingly, the organisation set up by the industry to regulate providers concedes that a “small number” of non-member firms “are behaving inappropriately”. And 10 days ago the Financial Services Compensation Scheme, the official safety net for customers of financial firms that go bust, issued a warning that “individuals could lose out if their provider fails”.
Now some funeral directors and consumer groups are claiming that parts of the sector are at risk of collapsing, and that in some cases middlemen are taking hundreds of pounds out of customers’ plans. Of course, with a prepaid funeral plan the person who bought it isn’t around when it is claimed on – and in some cases grieving families are being hit with unexpected extra bills at what is already a very difficult time.
Plans tend to cost &3,000-&4,000 and are typically paid for via monthly instalments or a lump sum. What is covered varies between providers, and plans are sold in different ways – including by telephone and “in-home” sales agents – and there have been claims that some companies are using aggressive tactics.
However, many people may be unaware of the commission and administration fees charged by some providers acting as middlemen between the customer and the funeral director.
Funeral director Johanna Loveridge was astonished when a client bought a &3,420 plan, but only &2,535 went towards the funeral. “I wrote back saying, ‘Is there a mistake? Because this doesn’t seem right’ … and that’s how I found out there was an admin cost of almost &1,000,” she says.