How to deal with the cost of dying

Against the unrelenting backdrop of Covid-19, here’s how to navigate the financial side of bereavement

Funeral costs hit a record high of £9,263 last year (Marcus Lindstrom/iStock)

As the first unwelcome anniversary of Covid clicks round, official figures show more than half a million people have passed away in the UK since last March, including over 100,000 excess deaths.

And while the last thing we need to deal with at such a time is paperwork and bills, new figures reveal funeral costs hit a record high of £9,263 last year, while separate data point to long delays and administration errors heightened by the pandemic.

The average cost of a basic funeral which includes cremation or burial, and the fees for a doctor, funeral director, and a minister or celebrant, was £4,184 last year. That’s a rise of almost 130 per cent in the last decade, according to new data from SunLife.

The cost ranges from £3,885 for a cremation to £5,033 for burial. But the total cost of the funeral, including extras such as flowers, food, a wake or gathering, and transport was £9,263.  

More than a third of families have no savings for such high bills, the survey found and more than one in 10 of those already dealing with the emotional impact of bereavement said the cost of a send off caused them notable financial problems. A quarter of those faced with this kind of bill used a credit card to pay with 25 per cent borrowing the money from someone else.

So what are the options for funeral funds?

You could put money into a savings account specifically to go towards these costs, informing friends and family so they know what you would like to happen when you die.

There’s also the option of a pre-paid funeral plan. These allow you to pay in advance for the funeral, either in a lump sum or regular payments over a set period, which isn’t counted as part of your estate for inheritance tax purposes when you die.

Not all costs will be covered under these plans and, crucially, most of these plans are not protected by the Financial Services Compensation Scheme (FSCS). If the company were to go bust at any point in the hopefully long period before the money is needed, the funds could be lost.

If the death is sudden, funeral costs can also be covered by the deceased person’s estate or through a life insurance plan. When someone dies, money specifically for the funeral can usually be released from their estate when the death has been registered.

Those on low incomes may also be able to get help paying with the costs with a funeral expenses payment of up to £1,000 from the government, although this usually has to be paid back at a later date.

Meanwhile, making a will can make the entire process slightly more straightforward for those left behind. Despite a surge in will writing thanks to the pandemic, around 40 per cent of people do not have one. 

In your will you can state what you would like to happen when you die, who you want to look after your finances, and who the executor of your estate will be. If there is no will the deceased person’s closest living relative is usually made the executor, which may not be their partner if they’re not married or in a civil partnership.

The executor will also need to tell a long list of companies about the death, from financial institutions to household utility firms. There are a few systems set up to make this easier, including Tell us Once, the government’s scheme whereby you only have to notify it once about the death and it then informs all other government organisations about the death.

A free service, Settld, works in a similar way but for private companies. Launched last week, it was prompted by the personal experiences of Vicky Wilson, co-founder and chief executive officer.

“After losing my grandmother 18 months ago, my mother and I were left closing all of her accounts,” she says.

“It was a terrible process of saying ‘My grandma has died’ multiple times to multiple companies and then having to chase them up. While some businesses get it right, too many get it wrong and add unnecessary stress to those who need it least.”

However, despite the measures put in place to help the bereaved, mistakes often happen and financial institutions have repeatedly faced criticism over how they deal with those in mourning.

New research from consumer group Which? shows that bereaved families are facing severe delays and costly administration errors when settling their loved ones’ finances after death.

It asked 1,600 people their experience of acting as an executor. Many said they had faced delays, admin errors, and poor knowledge when dealing with banks, and these had increased since the start of the coronavirus pandemic.

The survey found 17 per cent of people waited more than three months before they could close a loved one’s bank account, rising to 37 per cent for those who began probate last year.

Almost a fifth of the bereaved report that it has been very difficult to contact a financial provider during and after lockdown, compared with just 3 per cent before March 2020.

Many mistakes made by the banks have left people out of pocket too, including one woman who had to pay £4,000 in funeral fees herself because her father’s bank had lost his death certificate, the group warned.

“Unacceptable mistakes by banks [are] cropping up again and again during the probate process, leaving bereaved customers even more distressed and potentially out of pocket because of avoidable errors and delays,” says Jenny Ross, Which? Money editor.

“Banks must ensure they treat executors with compassion by communicating sensitively and making sure their processes are as efficient as possible.”