Pay now, get buried later

Pre-paid plans ensure that you get tomorrow's service at today's prices, writes Sarah Jagger

AS BENJAMIN FRANKLIN said, in this world nothing can be said to be certain except death and taxes. And most of us don't want to think about either - especially death.

This is why, according to research group Mintel, only 15 per cent of funerals are arranged in accordance with the wishes of the deceased - the rest are organised, arranged and funded by the families.

To save your family a lot of unnecessary distress and expense, you could take out a pre-paid funeral plan. This is certainly what funeral plan companies want you to do. They now offer a range of savings and insurance plans to ensure your last wishes can be paid for. But are they really good value - or just a good way of making money?

Most of these plans allow you to arrange the funeral you want and ensure it can be afforded. Funeral costs are increasing rapidly. In the last 10 years alone, funeral costs have more than doubled. In 1987 a traditional burial would have cost around pounds 550; today it would cost pounds 1,215.

Around 250,000 people in the UK have now paid up in advance for their funeral expenses using pre-paid plan or bond, and over the next 10 years it is estimated that 7 million will do the same.

Pre-paid plans allow people to specify in advance the details of their funeral and pay the costs either as a lump sum or by monthly instalments (which increases the cost of a plan). The advantage is that the funeral costs are fixed at today's prices, but buyers should check which items are covered, and in particular whether all disbursements - for example, doctor's fees, minister's fees, cremation service fees and the cost of a burial plot - are included in the price guarantee.

All plans basically offer three levels of service:

o A basic funeral, usually a cremation, plus all the funeral director's charges and disbursements.

o Standard or traditional funeral, which is the same as a basic funeral but includes a better-quality coffin, a limousine, and disbursements for either a burial or cremation.

o A superior service, which includes a solid wood coffin, two or more limousines, all disbursements plus some additional services.

However, will your money be safe? The big problem with pre-paid funeral plans is the lack of regulation. Three years after an Office of Fair Trading inquiry, the Government is considering ways to implement external regulation. "We want to ensure that consumers know what they are buying and get the funerals paid for. We are working toward producing some form of consumer protection," says David Mattes of the Department of Trade and Industry.

In the meantime, the two main industry regulation groups are the National Association for Pre-paid Funeral Plans (NAPFP) and the Funeral Planning Council (FPC).

You should also check before you buy a plan that the funds are held in a trust with independent trustees, and that the trust's deeds and the names of trustees are published.

The Funeral Ombudsman Scheme is concerned with redressing complaints when something has gone wrong with the funeral - it does not regulate funeral pre-payment plans.

There are three main providers of national funeral plans. Golden Charter is the largest funeral planning network in the UK and provides pre-paid funeral plans through the independent sector of funeral directors, which conduct of 60 per cent of funerals in the UK.

CRS Funerals (Co-operative Retail Services) operates the Co-op Funeral Bond through its network of funeral homes.

SCI is the world's largest funeral business and in the UK it now operates the Age Concern Funeral Plan, Chosen Heritage Plan and Dignity Plan.

Most providers do not restrict access to plans by age or health, but Graham Williams of the NAPFP says the majority who take out plans are in their sixties.

Once you start paying money into a plan, you'll see no return on it. No interest is accrued. This means that if you were to cancel you would only get back what you paid in.

So would you be better off using a conventional financial product to save up for a funeral?

There are several options. For example, by paying pounds 20 a month (the typical funeral plan monthly instalment) into an average instant access savings account paying 5.1 per cent net, you would stand to get round pounds 1,368 after five years, says Rebekah Kearey, of Roundhill Financial Management. This would give you enough to cover the basic or mid-price funeral.

Alternatively, by investing in a personal equity plan (PEP) growing at 5 per cent a year over five years, your pounds 20 a month would produce pounds 1,230, says Francis Klonowski of Klonowski & Co (but you'd have to use a new individual savings account (ISA) to continue monthly contributions after April 1999). This would also cover a standard funeral.

Alternatively you could take out a whole-of-life insurance policy that pays out a lump sum on your death. You agree to pay premiums for the rest of your life or up to a certain age, often 85, and the insurance company agrees to pay out a fixed sum (plus bonuses if the policy is a with-profits one). You can start paying into a whole-of-life policy in your fifties and they usually have a fixed payment period of 10-20 years.

A 60-year-old male non-smoker paying pounds 20 monthly into a Scottish Provident whole-of-life policy would give a sum assured of pounds 9,628. This is far in excess of the funeral costs, although the additional sum could be useful if death leads to a number of other costs for the family.

If you want the proceeds from the policy to go to your heirs and not to you, and therefore stay outside of your estate for inheritance purposes, Mr Klonowski advises people to have them "written in trust."

Contacts: Age Concern, 0800 387718; Avalon, 0161-236 3602; Chosen Heritage, 0800 221166; Co-operative Funeral Bond, 0800 289120; Dignity Plan, 0800 387717; Family Funerals Trust, 0800 334433; Funeral Ombudsman, 0171- 430 1112; Funeral Planning Council, 01222 382046; Golden Charter, 0800 833800; Golden Leaves, 0800 85445; National Association of Pre-paid Funeral Plans, 0121-711 1343; Society of Allied and Independent Funeral Directors, 0171-267 6777.

Sarah Jagger is a staff writer at Moneywise magazine.

FUNerAL PLANS

Pre-paid plans on offer for mid-price or traditional funeral

Provider Cost of Cost of paying

funeral monthly over

five years

Age Concern Funeral Plan pounds 1,310 pounds 25.20

Avalon Life Care Assurance pounds 1,450 pounds 32.63

Chosen Heritage pounds 1,371 pounds 26.28

Co-op Funeral Bond pounds 1,340 pounds 25.75

Dignity Plan pounds 1,345 pounds 25.88

Family Funerals Trust Ltd pounds 1,395 pounds 27.39

Funeral Planning Services pounds 1,275 pounds 24.79

Golden Charter pounds 1,310 pounds 25.70

Golden Leaves pounds 1,227 pounds 24.86