Death - the final rip-off
Few things in life are predictable. You cannot foresee how many homes you'll buy or how many children you'll have.
However, one thing is for sure: we'll all die. So this should be one element of our lives we can completely plan for, but we don't. The reality is most of us don't even discuss what we'd like for our funeral, let alone how to pay for it.
Dying is an expensive business. While an extravagant funeral would set you back £15,000, an average one will cost you £4,955, according to Sun Life's Annual Cost of Dying Report - making it the fourth-biggest expense we all face after buying a house, getting married and having children.
We need to wake up to the costs because, at present, businesses are several steps ahead of us and are making big bucks from our ignorance. The basic cost of a funeral has risen by 61% over the past eight years – vastly outpacing inflation, which has risen by 24.4% over the same period.
Why costs are going up
So why the big rise? The basic price of a funeral, once you strip out the optional costs such as flowers and a wake, is £3,091. This is made up of four elements: the funeral director's fees; death certificate; the cost of the service; and burial or cremation fees.
The cost of the death certificate has stayed the same but all the other elements have risen. The Church of England has increased its funeral fees as cash-strapped parishes attempt to augment their income. Funeral directors have also put their prices up by 6.7% on average over the past year as a means of underpinning profits as the death rate continues to fall (it has been declining since the 1970s), while their costs are rising.
But the biggest factor is the soaring cost of cremations or burials. Cremation fees have risen by 117% since 2001, according to a study by the Yorkshire Post - in 2012 Sun Life Direct put the average cost of a cremation at £705.
The main reason for this rise is that councils are having to spend large amounts of money bringing crematoriums into line with new laws concerning their emissions. Prices are also rising because "local authorities are turning to cremation income following budget cuts," says Simon Cox, head of life planning, at Sun Life Direct.
When Sun Life surveyed funeral directors, more than a third said they believe one reason for the rise is that cremation fees are an easy source of income for local authorities. But it's not just the local council lining its pockets as not all crematoriums are owned by local authorities – funeral directors now own more than 50 of the 260 in the UK.
The cost of dying
The average cost of dying is £7,247, made up by:
- £3,091 - Non-discretionary funeral costs including funeral director fees; doctors' fees; fees for a religious or secular service; and burial or cremation charges.
- £1,864 - Discretionary funeral costs including death and funeral notices; flowers; order sheets; funeral cars; catering for the wake; venue hire; and a memorial.
- £2,292 - Estate administration fees including the cost of professional services such as solicitors and banks to wind up the deceased's estate.
Source: Sun Life, 2012
Unfortunately, opting for a burial won't save you money as fees rose by 13.4% on average last year, according to Sun Life. The average cost now stands at £1,483. The shortage of burial space is the main reason cited but, again, there are suspicions that councils are bumping up the price to cover cutbacks elsewhere.
Many of the high street's most trusted companies are getting in on the rip-off too, offering financial products to cover funeral costs. There can be no doubt that planning for the costs of your final farewell is a good thing, says Cox. "It will provide help to loved ones not just in a financial way but also practically and emotionally, and can help ensure that one's wishes are enacted."
However, think carefully about how you plan as some products do not offer value for money.
Funeral benefit plans
One offender to watch out for is a funeral benefit plan, offered as an add-on to an over-50s life insurance plan. The first problem with this is that you may well end up paying in far more than you get back because the payout you receive is fixed from day one but you could be paying into the plan for 30 plus years.
Second, the plans tie you to one funeral director - usually an expensive one. Finally, the payout is not inflation-linked or guaranteed to cover everything, so even after years of saving your relatives could still end up with a large bill.
This leaves two good options for funeral planning. You could put money into a savings account and let your family know that the money is intended to cover your funeral, perhaps by mentioning it in your will. This option provides you with the flexibility of maintaining control of your money and gives your relatives the option to choose which funeral director they use.
The other option is to purchase a funeral plan. This is where you plan and pay for your funeral before you die. This may seem a little morbid but you'll get the funeral you want and your loved ones won't be left with the bill.
"Funeral plans are a good method of financial forward planning, as you pay today's funeral prices for a future service that is fully guaranteed against any price increases," says Dave Smith, spokesperson for The Co-operative.
The Co-operative Funeralcare and Golden Charter are two groups offering pre-paid funeral plans, with prices starting from £2,820. Just be sure to read the small print and know exactly what the plan will cover. For example, the cheapest plan offered by Golden Charter costs £1,955 but doesn't include crematorium or burial fees, which can be a couple of thousand pounds.
Also find out how you pay. Most allow you to pay a fixed sum, spread over a set period, or you can pay a low monthly sum forevermore. With the latter option, you may end up paying out far more than you'll ever get back.
For example, The Co-operative's cheapest plan costs £2,850 upfront or £22.85 a month for a 50-year-old man but he would have to pay that until he died to get the payout. If he lived to 80 he would pay £8,226, which is £5,376 more than the fixed sum.
As unsavoury as it may seem, cost comparison and even haggling could also save you money. David Stonehouse, 58, from Lincolnshire, has twice negotiated funeral costs, both times successfully.
"The first time was in 2005 when my uncle died and I was one of the executors. I asked for a 10% discount if I paid the bill within one month of the funeral. The funeral director agreed without hesitation."
So the following year when David's mother died he decided to haggle again. "I discussed discounting with my brothers, who were appalled at the suggestion that one should even try to negotiate at such a delicate time. However, we agreed to try, so once again I asked for a 10% discount and this was agreed instantly by the chap discussing the arrangements."
Dying simply isn't as cheap as it used to be. This country really needs to get away from its embarrassed attitude to death and recognise the need to plan for the inevitable. With just a little bit of financial planning you can alleviate the pressure on your family at a sensitive time and also make sure you aren't subject to one final rip-off.
How to avoid the cost of a funeral completely
For those prepared to take drastic action, there is one way you can avoid the cost of a funeral completely - donate your body to medical science. If you donate your body to a medical school for it to use for anatomical research, education or testing, the school will have you cremated at no expense to you or your family.
If you are interested in donating your body to science, you need to speak to your local medical school to find out its requirements, then write a letter of consent signed by you and a witness. For more information and to find the contact details for your local medical school, visit the Human Tissue Authority’s website at hta.gov.uk.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.