With the end of the tax year soon upon us, thoughts turn to investing cash into ISAs, but what about the alternative of investing in a pre-paid funeral plan, asks Andrew Simpson, Lead Panel Solicitor with legal and financial planning specialist Ensure Inheritance.
Should you opt for an ISA or should you join the 27%* of people who have bought a prepaid funeral plan?
The national average cost of a basic funeral has increased by more than 92% in the last 11 years, with costs set to continue rising. The bottom line is, as far as funeral prices are concerned, the only way is up. The average cost of a basic funeral has risen by 2.9% from £3,590 in 2014 to £3,693 in 2015, and by 2020 will be £4,620.
If we take a look at the percentages mentioned above, it becomes obvious that a cash ISA is not going to make the grade in the short or long term. The best I could find was a five year fixed cash ISA at 2.33 AER.
If saving money in an ISA will not cover future funeral costs, what about a life insurance policy?
Often known as over-50s plans, these typically pay out a set amount when you die, as long as that is not within the first two years. Within the first two years, you would (at best) just have the premiums paid returned to your estate.
Unlike funeral pre-planning, your family will have to make all the usual funeral arrangements – they will just have a cash sum towards the costs which may or may not be adequate.
With the life insurance policy, you do spread the cost out. However, you could pay much more in monthly premiums than the policy will ever pay out if you live a long time. Which? in their review of pre-paid funeral plans said: “a 60-year-old man paying £15 a month to Legal & General would get £2,879 for a funeral after two years. After his 76th birthday, he’d have paid more than the policy covers and would have to continue paying until he died or reached 90.”
So, what about a pre-paid funeral plan? What makes it any different? Well the key difference is that the funeral director costs are guaranteed. So no matter how they may rise in future, your family will not be asked for a penny more for the services provided by the funeral director, and a contribution to third party costs such as crematoria and doctors’ fees is included. And having a pre-paid funeral plan can also help when it comes to planning for long term care fees and allow your family to retain more of your estate.
Based in Seaham in County Durham, Ensure Inheritance provides a range of legal and financial planning services which help protect financial assets to provide their clients and their loved ones with peace of mind. In addition to funeral planning and pre-payment plans, services include long term care planning, wealth preservation trusts, Wills and Estate planning, funeral planning, inheritance tax planning, powers of attorney, court of protection deputyships, and probate.
Ensure Inheritance can be contacted on tel. 0191 338 5143, via email at firstname.lastname@example.org or via its website www.ensureinheritance.co.uk