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Funeral plans vs ISAs, savings and guaranteed over 50s
Funeral plans vs ISAs, savings and guaranteed over 50s

Planning ahead for your funeral can be a positive thing to do. It allows you to ensure your funeral is carried out as you wish and saves your family from making difficult decisions about what you would have wanted after you’ve gone. Making financial provisions for your funeral can also help protect your loved ones from unexpected money worries at the most difficult time.

Unfortunately, simply putting money aside for your funeral or taking out an insurance policy might not be enough to cover the cost of your funeral when the time comes.

SunLife’s annual ‘Cost of Dying Report’ indicates that funeral prices have continued to rise - by 128% since the insurer’s first report in 2004. The most recent Cost of Dying Report - based on a survey of more than 1,500 people who have organised a funeral over the last four years - found that the average cost of a basic funeral had reached £4,184 in 2020. A quarter of the people surveyed expressed surprise at the costs.

The Cost of Dying Report also highlights the fact that, consistently, many people don’t put enough aside to cover the cost of their funeral. The latest survey showed that although 65% of people had made some financial provision for their funeral, only two thirds of those had put aside enough to cover the whole cost.

Sadly, 14% of those families were left with ‘notable’ financial problems after having to find money to pay for the funeral they had to organise. Some had to pay using credit cards, whilst others borrowed from friends or relatives to meet the expense.

Lowest interest rates

SunLife’s forecasts show that the average cost of a basic funeral will pass £5,000 within five years. And if you are saving for a funeral, it’s not possible to rely on future interest rate increases to protect you from funeral funding shortfalls.

Regular savers have endured very low interest rates since the financial crash in 2008 and the interest rates available across all UK savings accounts recently have been stuck at an all-time low. On accounts providing easy access to savings, rates fell as low as 0.19% last year; locking your money away for five years was still paying less than 1% in December 2020.

Financial website, ‘This Is Money’ describes ISA rates as ‘pitiful – even more so than regular accounts’. The advice site reported in February that record amounts were pulled from tax-free ISA saving accounts in the last part of 2020.

Making matters worse for savers, already low interest rates have been pushed lower by the pandemic. Successive lockdowns have meant spending has stalled and savings have soared - Britons squirreled away £54.6billion during the three months between April and June 2020. With robust cash reserves, many banks don’t necessarily need to rely on attracting everyday savers and can afford to reduce regular savings rates. Hope for any change is slim - in February 2021, the Bank of England gave lenders six months to prepare for negative interest rates, although it didn’t indicate that another base rate cut was a certainty.

Insurance shortfalls

Some people take out guaranteed over 50s life cover in the hope that the fixed lump sum paid on their death will cover the cost of their funeral. Making provision for your funeral costs through a guaranteed over 50s insurance policy will help cover the cost of your funeral, but it is important to realise that final sum paid may not cover the whole cost of your funeral service.

Money Savings Expert’s Martin Lewis criticises the policies, writing, “The amount you're going to get paid may seem decent when you take it out – but each year it's eroded by inflation. So what looks like a lot at the start risks becoming a sum that won't stretch far enough – possibly not even enough to pay for your funeral plan.”

One further shortcoming with over 50s insurance policies - the longer you live after taking out the policy, the greater the chance that you will pay in more in premiums than you get out at the end.

Funeral plan benefits

Concerns over funeral-cost inflation and the very real threat of savings and insurance shortfalls have driven an increase in the number of people investing in pre-paid funeral plans. More than a third (35%) of the people surveyed for SunLife’s (2021) Cost of Dying Report had relied on a pre-paid funeral plan to pay for the cost of the funeral they arranged.

Unlike an ISA or a regular savings account, Golden Charter funeral plans fix the cost of your funeral director’s services included in the plan at today’s prices. This ensures that there will be nothing more for your family to pay for these services, regardless of any rise in the price of funeral director services.

With a range of payment options available to suit all budgets, Golden Charter’s funeral plans cover funeral director’s services, with options for a coffin, hearse and transportation, and an allowance towards third-party costs such as crematorium and officiants’ fees.

A pre-paid funeral plan also allows you to set out your funeral preferences, from the type of service you want to readings, flowers and music. And Golden Charter plan holders can choose a trusted, independent funeral director from a network of 2,800 independent funeral directors around the UK1.

Putting money aside in a regular savings account or taking out an insurance policy beats making no provision for funeral expenses. With continued low interest rates and funeral plan inflation, however, the benefits of guaranteeing your funeral director’s costs through a pre-paid funeral plan are clear to see.

Golden Charter

Smart Planning for Later Life

Golden Charter has one of the largest networks of independent funeral directors in the UK. Many are long-standing, family-run businesses and all provide a compassionate and professional service.

Find out more about how you can plan for your funeral with one of the funeral directors in our network.