What Is a Pre-Paid Funeral Plan?
A pre-paid funeral plan (also called a prepayment funeral plan or funeral plan) allows you to pay for your own funeral in advance — either in a lump sum or by instalments — at today's prices. The plan locks in the cost of the funeral director's services, providing financial certainty and relieving your family of the burden of arranging and paying for a funeral at a very difficult time.
According to the Funeral Planning Authority, over 1.5 million pre-paid funeral plans were in force in the UK at the end of 2021. The sector has grown significantly as more people seek to plan ahead and protect their families from unexpected costs and difficult decisions.
FCA Regulation: A Landmark Change for Consumer Protection
The most significant recent development in the pre-paid funeral plan market is the introduction of FCA regulation from 29 July 2022. Before this date, pre-paid funeral plans were largely unregulated, which led to numerous cases of consumers losing money when providers went out of business, or receiving far less than they expected at the point of claiming.
Since July 2022, any person or company selling pre-paid funeral plans in the UK must be authorised by the Financial Conduct Authority. This means:
- Plan funds must be held in a ring-fenced trust or whole-of-life insurance policy, separate from the company's operating funds
- Providers must treat customers fairly and communicate clearly about what is and is not included
- Consumers have access to the Financial Ombudsman Service if they have a complaint
- Eligible customers may be covered by the Financial Services Compensation Scheme (FSCS) in the event of a provider failure
- Providers must give a 30-day cooling-off period during which you can cancel and receive a full refund
Always check that a funeral plan provider is listed on the FCA Register (available at fca.org.uk/register) before purchasing a plan. Providers operating without FCA authorisation are breaking the law.
How Pre-Paid Funeral Plans Work
The mechanics of a pre-paid funeral plan are straightforward. You choose a plan — which outlines the type of funeral and services included — and pay either a one-off lump sum or in monthly instalments. The provider holds your money (in a trust or insurance policy) until the plan is claimed. When you die, your family contacts the plan provider and the funeral director, who then carries out the funeral as specified in the plan.
Plans are typically linked to a specific funeral director, a regional network, or a national network. It is important to check:
- Whether the funeral director named in the plan is near your home
- What happens if your circumstances change (you move, or the funeral director retires or closes)
- Whether the plan can be transferred to a different funeral director
What Is — and Is Not — Typically Covered
One of the most common sources of confusion about pre-paid funeral plans is understanding exactly what is guaranteed. Most plans cover:
- The funeral director's own professional fees in full
- Collection of the deceased within a stated geographical radius
- Care of the deceased
- A specified coffin (or coffin to an agreed value)
- The hearse and staff on the day of the funeral
- All required paperwork
Third-party disbursements — particularly cremation fees, burial costs, and minister's fees — may or may not be fully covered, depending on the plan. Some plans:
- Guarantee to pay third-party costs in full regardless of future increases
- Allocate a fixed sum towards third-party costs, with any shortfall payable by the family at the time
- Exclude third-party costs entirely, requiring the family to pay these separately
This distinction is critically important. Cremation fees, for example, have risen significantly in recent years. A plan that guarantees to cover all cremation costs regardless of increases provides considerably greater certainty than one that fixes only a contribution.
What to Look for When Buying a Pre-Paid Funeral Plan
The National Association of Funeral Directors (NAFD) advises consumers to consider the following when purchasing a pre-paid funeral plan:
- FCA authorisation – Always verify the provider is on the FCA Register.
- What is guaranteed – Read the contract carefully and identify every element that is price-guaranteed and every element that may involve additional charges for your family.
- Trust vs insurance – Understand how your money is held. Both trusts and whole-of-life insurance policies are acceptable under FCA rules, but the structure affects how your money is invested.
- Funeral director link – Check that the funeral director(s) in the plan's network are accessible from your address, and understand the process if they are not available at the time of need.
- Cancellation policy – Understand what you receive if you cancel outside the cooling-off period.
- Instalment plans – If paying by instalments, check what happens if you die before completing payment, and whether interest is charged.
- Family access – Check that your family knows the plan exists and where to find the plan documentation. A plan that no one knows about cannot be claimed.
Pros and Cons of Pre-Paid Funeral Plans
Advantages
- Price certainty – You pay at today's prices (or fix the funeral director's fee), protecting against future cost increases
- Peace of mind – You make decisions in advance, without the emotional pressure of bereavement
- Family relief – Your family does not have to organise or pay for the funeral at an already difficult time
- Your wishes are recorded – Preferences for music, readings, and service type are documented and honoured
- Potentially outside the estate – Plan funds are typically held separately and do not form part of the estate for means testing purposes (though you should take independent financial advice on this)
Disadvantages and Risks
- Not all costs are necessarily guaranteed – Unless the plan explicitly guarantees all costs including disbursements, your family may face additional charges
- Instalments may not be completed – If you die before completing instalment payments, the plan may not be fully paid up, resulting in a shortfall
- Flexibility may be limited – If your family wants a different funeral from what is specified, changes may not be possible or may incur extra costs
- Better alternatives may exist – For some people, a dedicated savings account or whole-of-life insurance policy may offer greater flexibility
Alternatives to Pre-Paid Funeral Plans
A pre-paid funeral plan is not the only way to plan ahead for funeral costs. Alternatives include:
- A dedicated savings account – Set aside money specifically for funeral costs. This provides maximum flexibility but no price protection.
- Whole-of-life insurance – A policy that pays out a fixed sum on death, which can be used for funeral costs. Premiums continue for life. Check whether the eventual payout will be sufficient given future cost increases.
- Writing your wishes down – Even without a financial product, writing down your preferences for your funeral (type of service, music, readings, burial or cremation) and sharing this with family is extremely valuable and costs nothing.
For more on funeral costs and budgeting, see our guide to funeral costs in the UK and our guide to planning a funeral on a budget.
This guide is provided by the National Association of Funeral Directors (NAFD), which represents funeral directing businesses conducting over 80% of all UK funerals. Find a trusted NAFD funeral director near you.
