Funeral Planning Industry Explained
The Industry regulators, Who they are, what they do.
In an ideal world, the price of a funeral would be a secondary consideration for the bereaved. However, the fact is current economic pressures combined with often limited market choice and/or price transparency, means often families feel compelled to pay far more for a funeral than they can comfortably afford – or that is fair. All too often this is the mistaken belief that the more one pays for a funeral, the higher the standard of service and care provided by the funeral director.
Even in this time of increased competition between funeral directors, and the effect it has in driving down price, there remains many firms of funeral directors whose profit margins are, in the NFFD’s opinion, wildly disproportionate to their costs.
The National Federation of Funeral Directors is a self-regulating trade body, with hundreds of funeral director members nationally, all of whom conform to the NFFD’s core principle - that it is perfectly possible to conduct funerals profitably, but without charging customers extortionate fees – and without negatively impacting on the standard of service, and quality of care provided.
Whilst there will always be a demand for the traditional and trusted ‘family’ funeral director, the NFFD recognises, and actively encourages, increased competition between firms of funeral directors and greater transparency in how they formulate their prices. The NFFD does this in the express belief both factors are vital to creating and maintaining a healthier balance between the price customers pay, and the quality of, and value for money in, the services they receive.
Why has the NFFD chosen to endorse Safe Hands Funeral Plans?
The NFFD endorses Safe Hands Funeral Plans, in recognition of the following:
Safe Hands Funeral Plans’ prices are within reach of a far broader market spectrum, than those of many other plan providers
Safe Hands Funeral Plans represent an exceptionally high degree of fairness in terms of their profitability for funeral directors and for Safe Hands Funeral Plans the company – and most importantly, in their affordability for the average consumer
Unless a customer nominates* a non-NFFD firm of funeral directors (as one they would, ideally, like to undertake their funeral**), Safe Hands Funeral Plans tries, wherever possible, to assign their funerals to funeral directors who are Members of the NFFD
In line with the NFFD’s aim of increasing competition, Safe Hands Funeral Plans funerals can be conducted by any firm of funeral directors (NFFD Members, or not) that agrees to undertake the service for the monies available in the plan
*Customers are welcome to nominate any firm of funeral directors that they would prefer to undertake their funeral. However, if, when the customer passes away, their nominated preferred firm is for any reason unavailable to perform the service, it will instead be conducted by an alternative firm at Safe Hands Funeral Plans’ discretion
**Safe Hands Funeral Plans cannot be assigned to firms that are owned/managed by Dignity Plc.
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National Federation Of Funeral Directors
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The Funeral Planning Authority (FPA)
The Funeral Planning Authority (FPA) is an organisation set up by the industry to regulate providers in the UK pre-paid funeral plan industry.
The FPA now operates a truly independent board which is separate from any plan provider.
Their aim is to ensure funeral plan providers that are registered with the FPA are operating in a manner that will result in customers getting the funeral they have paid for when it is needed.
They vigorously check that all registered providers abide by a set of Rules and a Code of Practice, which exceeds the statutory requirements.
They also, help customers who have a complaint about a plan or a provider by attempting to resolve matters with the provider. If the resolution is not possible they will provide the customer access to their independent dispute resolution process, which can be very useful in getting issues resolved quickly and efficiently.
The FPA is not a trade or membership body that providers can just pay a fee to join. In contrast, the providers can choose to apply for registration if they so wish, and then the onus is on them show that they can operate to the higher standards demanded by the FPA's Rules and Code of Practice.
The FPA also re-test providers operational standards on an annual basis when the providers re-registration application is considered by the FPA’s Compliance Committee.
The FPA does not regulate funerals or deal with complaints about funerals.
Complaints about funerals should first start with the funeral director in question and then with the relevant trade body for the funeral director involved. The two major trade bodies are The National Association of Funeral Directors (NAFD) and The National Society of Allied and Independent Funeral Directors (SAIF) As seen below.
*information sourced from:
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The National association of funeral directors “The Voice of the Profession”
They have been established since 1905 and have a large number of members and also supplier members.
The NAFD says they are “proud to be the voice of the funeral profession. It is a role we take extremely seriously, representing the views and interests of funeral businesses – and the bereaved families in their care – to the media and in all the UK’s Parliaments and Assemblies.”
The NAFD is the largest trade association for the funeral sector with 3,800 funeral homes represented as well as hundreds of suppliers to the sector and international funeral firms.
The NAFD represents the funeral profession at all levels of Government on legislative matters and campaigns on issues affecting not only funeral directors but also bereaved families too. We provide informed opinion to Parliamentarians, Government agencies and consumer groups on all funeral matters.
For the consumer, this means a reasonable level of protection as all of its members have a code of practice they must adhere to and follow at all times. The NAFD is very quick in dealing with complaints and consumer issues also, We think because the members receive lots of great benefits like business insurance etc. It does encourage members to adhere closely as to lose membership could cost the firm in a lot of ways.
Currently, do not regulate funeral Plan companies. Some are supplier members some are not!
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THE NATIONAL SOCIETY OF ALLIED AND INDEPENDENT FUNERAL DIRECTORS (ESTABLISHED 1989)
SAIF say it was “established in 1989 as a result of the growing disillusionment felt by many funeral directors with their traditional trade body, and in particular to help distance themselves from the aggressive acquisition and marketing techniques being widely employed by the conglomerates. Put simply, some areas of the funeral industry were getting a very bad reputation and independent funeral directors wanted to reassure the public that these practices did not apply to their businesses.
This proved to be sound judgment, as the aggressive tactics persisted, coming to a head when the American-owned Services Corporation International (SCI) acquired the two main conglomerates and subsequently had to sell all their UK interests.
Since its formation, SAIF has become accepted as a key voice speaking and representing only the independent funeral director, and is recognized by Government departments as well as many overseas organizations. It has stringent conditions for its membership, which include demonstrating a sound trading history and suitable premises, which are inspected before membership is accepted, and all members must adhere to a strict Code of Practice. For many, if not most people, at the time of a death in the family, the reassurance and experience of an established community funeral director is a great comfort and asset. The choice of a SAIF member to handle the arrangements ensures that peace of mind”.
So what does this give the consumer? In short, a very similar offering to the NAFD but has been here since the late 1980’s rather than the turn of the 1900’s.
Ethics are strong and code of practice is strict to make sure its members deliver a quality of service. If your plan provider is using independent funeral directors you would be happy and confident if it was a SAIF member that was actually conducting the funeral. Remember it’s not a prepaid funeral company that delivers the service it is still your local FD that the company works with.
The History of Prepaid Funerals
Preplanning is nothing new. Throughout history, people have planned and prepared for death. In Roman times, nearly 2,000 years ago, burial clubs held monthly meetings and collected dues to pay for members' funerals.
In the Middle Ages, guilds, crafts organizations, and fraternal groups in the USA collected funds in advance to pay for members' final expenses. Since ancient times, people have seen the importance of planning for the expense of a funeral honoring a dear friend's memory.
By the mid-19th century, London hosted over 200 burial societies--clubs that spread the cost of burial among members. With low selectivity, high rates, and weekly premiums, these clubs were the forerunners of modern industrial insurance.
In the early 1800s, some clergy in the United States came together for the same purpose. They founded "death insurance," which ultimately became today's life insurance.
For many years, funeral directors did not sponsor these plans. In fact, most funeral directors felt their profession shouldn't be involved. However, after World War I, some funeral directors in parts of the United States started offering "burial insurance." where they had contracts put in place by banks and insurance companies.
Many other plans followed, such as mutual benefit associations, funeral certificate plans, funeral debentures, funeral trusts, funeral savings accounts, and legal reserve funeral insurance. Benefits could be any combination of cash, credits, merchandise, and service. This was the American market place however and since world war 2 they had seen the cost of funerals sore higher and higher and the pre paid funeral plan was being widely recognized as the option to go down.
In the UK despite the wars and the losses we suffered the funeral prices stayed reasonable and attainable for most families following a death for many years, we also believe the trust and extended time frames given to pay the funeral directors after a service meant people could manage the bill.
In the 1980's we welcomed big business and large corporate companies to own, run and manage funeral directors. Because of this corporate structure, it was much easier to launch a prepaid funeral plan that was specifically aimed at their branches as a way of securing market share in the funeral industry, This company was Dignity and launched the first prepaid funeral plan in 1985 and the first funeral trust in 1986.
Dignity bought numerous funeral directors some with routes back to the early 1800's it has been American owned but is now back in the UK and on the London stock exchange.
From what we can establish from here on, is the marker was set on the industry as a viable, credible and important product and it wasn't long until other companies were set up. Golden Charter owned by an association of independent funeral directors, was founded in 1989 with the aim of safeguarding the future of local, often family-run businesses. they have been in business for over 25 years now and are one of the largest prepaid funeral plan companies in the UK. Along with Avalon also being a large long established prepaid funeral plan company being established in 1993
Back in the early 1990's though funeral costs were still low and in line with inflation around £1000 so many people didn't really see the full need of a plan! But slowly year on year the Price's started to rise but as a country with our wealth, we still didn't really bite the prepaid funeral plan option. Probably due to many life policies still able to cover the costs.
The big turning point for the industry was around 2010 when funerals hit £3000 this rise had come fast and was above inflation and now many thousands of families were struggling with funeral debt. This also meant funeral directors had to change their models and now charge upfront fee's of around £1500 before they will send an undertaker to collect you or a loved one.
This change now meant much normal life insurance policies were just not good enough to get the job done and pay for a funeral at the time of need.
With these prices still rising fast the current average cost of just a basic funeral plan is £3897 ** source Sunlife cost of dying report 2016 and the total overall average cost of dying is £8802.
This brings us to today and shows clearly why a prepaid funeral plan is a sensible option for many people. Buying at today's prices for a 50 year old is predicted to save your family in excess of £7000 which is a huge saving to anybody, combine this with the added benefit of removing the stress of loved ones having to arrange a funeral at a difficult time and you can see why were are taking a funeral plan every 5 minutes in the UK today.
Our advice is to act fast and arrange your plan today before the prices arise again.
The True Protection Of A Prepaid Funeral Plan Lies Within Its Trust
All prepaid funeral companies are set up with a Trust fund where your money is held securely for when it's needed at the time of your death! These trust funds are set up with Trustees that are independent of the prepaid funeral company and their directors, this relationship is also managed by trust actuaries and also solicitors that specialize in managing the relationship between the prepaid funeral company and the fund itself.
The Trust itself will usually be set up with a large amount of capital and have sections ring-fenced for your protection meaning even if you do not die for 40 years there will always be enough funds to cover the costs of the funeral you had agreed at the time you took out the plan. The trusts are regulated by the Prudential Regulation Authority and the Financial Conduct Authority (FCA) to keep your funds safe and secure for when they are needed.
The rest will be carefully invested in stocks, property, and other low-risk investment portfolios. This is where the prepaid funeral companies will make their money. They hope they can get there trust to make a greater return on the invested capital than the rising costs of funerals themselves. Funerals are rising at around 7% per year but a well-managed trust can yield around 12-15% return on investment so it makes good business for everyone involved.
We often get asked well why can I not just do that? The true reality is for 99% of the population you simply would not have enough capital to open a trust of this structure in the first place.
The product is still fantastic though and does come with the legal guarantee that the price you pay today will cover the funeral whens it's needed. compare this to life insurance products and how they make their money you can truly see that a prepaid funeral plan is a much better option. More information about this can be found on the befits page of this website.