Pre-Paid Funeral Plan or Saving Yourself

A pre-paid funeral plan lets you arrange and pay for your funeral in advance, usually at a fixed price, either as a one-off payment or in instalments¹. Saving the money yourself means keeping it in an account you control and paying the funeral director when the time comes. The main trade-off is between fixing today's price and keeping your money flexible.

Funeral costs have risen sharply. The average cost of a basic funeral in 2021 was £4,056, an increase of 121% since 2004². A basic funeral in 2015 cost £3,693, up 92% since 2004³. Those figures show why the question of whether to lock in a price now or save towards a future cost matters.

Since 29 July 2022, any financial business that sells and provides funeral plans must be regulated by the Financial Conduct Authority⁴. That brought pre-paid plans into the same regulatory framework as other financial products, with access to the Financial Services Compensation Scheme if a provider fails¹. Money saved in a bank account is protected separately, under the deposit protection rules that apply to savings.

Saving for a funeral yourself: how it works

Setting money aside in a savings account is the simplest alternative to a pre-paid plan. The funeral can be paid for from a financial scheme the person had, such as a pre-paid funeral plan or insurance policy, by family or friends, or with money from the person's estate, such as savings they held⁷. If you save specifically for this purpose, the money stays in your name and you decide when and how it is used.

One practical advantage is that the money is available immediately. If the person who died had money, it can usually be used to help pay for the funeral first⁷. Banks can often release money directly to the funeral director on presentation of the death certificate and funeral invoice, without waiting for probate⁸. Funeral expenses are often the highest priority from the estate except for some secured debts such as mortgages⁸.

If there is not enough money available, you may be able to set up a monthly payment plan with the funeral director where the funeral is arranged and there is money outstanding on the bill¹. That option exists regardless of whether a plan was in place.

The downside of saving is that you carry the risk of funeral costs rising faster than your savings grow. There is no mechanism in a savings account that adjusts for funeral cost inflation. The money is also visible to means-tested benefit assessments and care funding calculations in the usual way, because it is held in your name as savings.

Fixed price or growing savings: how each copes with rising funeral costs

A pre-paid funeral plan generally fixes the cost of the funeral director's services at the price agreed when you buy it¹. That means if funeral costs rise between purchase and death, the plan covers the difference for the services included. The provider carries the inflation risk, not you.

Savings do not have that mechanism. The average cost of a basic funeral rose from £3,693 in 2015 to £4,056 in 2021, an increase of 121% since 2004². If your savings grow more slowly than funeral costs, there will be a shortfall. The rate at which savings grow depends on the account and the interest rate, which is not guaranteed to keep pace.

Some insurance products offer a form of inflation protection. Increasing term insurance, for example, raises the amount you are covered for either by a fixed amount each year or in line with inflation⁹. That is a different product from a funeral plan, but it shows that some financial products are designed to keep pace with rising costs while a plain savings account is not.

The Retirement Living Standards research found a shared view that at a moderate and a comfortable living standard, funerals should not be a financial burden to others, and the cost should be fully covered by a pre-paid funeral plan¹⁰. That is a research finding about what people consider adequate, not a recommendation.

What each option costs, including fees and instalments

A pre-paid funeral plan is paid for by a one-off premium or in instalments¹. The total cost depends on the provider, the funeral director's price list and the services included. The plan fixes the price of those services, so the amount you pay is known from the start.

Saving has no product fee, but the cost is whatever the funeral costs at the time of death. If you save £4,056 today and the funeral costs more in future, the difference comes from somewhere else. If it costs less, the surplus stays in the estate.

Government support interacts with both options. In Scotland, the Funeral Support Payment comes in two parts: an amount for necessary expenses and a payment towards other funeral expenses⁵. Where the person who died had no pre-paid funeral plan, the payment towards other funeral expenses is £1,327.75⁵. Where there was a pre-paid funeral plan paid in full, that amount is reduced to £162.05⁶. The Funeral Support Payment will not cover all of the costs of a funeral¹³.

In England, Wales and Northern Ireland, the equivalent is the Funeral Expenses Payment. Where the person who died had a pre-paid funeral plan, the amount towards other funeral expenses is capped at £120¹⁴. The full amount is unlikely to cover even the cost of a simple funeral, so a shortfall is likely¹⁵.

Flexibility: getting your money back or changing your mind

Savings are fully flexible. You can withdraw the money at any time, spend it on something else, or leave it in the estate. There is no cancellation process and no penalty for changing your mind.

A funeral plan is a contract. If you cancel, what you get back depends on the plan's terms and how much you have paid. The Financial Services Compensation Scheme, when dealing with a failed provider, will ask the customer whether they want replacement cover or compensation instead¹⁶. That process applies when a provider has gone out of business, not when a customer simply changes their mind.

For comparison, single-premium insurance policies cancelled early usually return much less than a pro-rata amount, especially if cancelled after the initial cooling-off period¹⁷. Funeral plans are a different product, but the principle that early cancellation can reduce what you get back is common across long-term financial products.

If you stop paying into a whole-of-life policy, some of the plan's value typically remains, but it is far lower than the original cover and can reduce over time¹⁸. That is a different product again, but it illustrates that stopping payments on a long-term product generally means losing value.

The flexibility question comes down to this: savings can be redirected at any point, while a funeral plan is committed to its purpose. If your circumstances might change, savings keep your options open. If you want the funeral cost settled and are confident the plan suits your wishes, a plan removes the money from your day-to-day finances.

What happens if I die before I have finished paying for a funeral plan in instalments

If a plan is not paid in full before death, the plan may not pay out the full amount. In Scotland, where a pre-paid funeral plan has not been paid in full, any sum payable under it is deducted from Funeral Support Payment¹¹. Where the plan was paid in full before death, the payment towards other funeral expenses is reduced to £162.05⁶.

The estate may need to cover any shortfall. Any money left by the person who died must be used to pay towards the cost of their funeral before any rent, utilities or other debts are paid, except where they left secured loans such as a mortgage, which must be paid first⁸. Remaining debts are paid in priority order, and any remaining debts are written off if assets run out⁸.

If the person who died had assets, once these become available they may need to be used to repay any Funeral Support Payments before any inheritance is paid¹⁹. That means a Funeral Support Payment is not simply a grant that disappears; it can be recovered from the estate.

For savings, the position is simpler. The money is there and can be used immediately. There is no instalment schedule to complete and no risk of a part-paid plan reducing what is available.

What happens if the plan provider or your bank fails

If a funeral plan provider goes out of business on or after 29 July 2022, including plans bought before that date, you may be protected by the Financial Services Compensation Scheme²⁰. The provider must be FCA authorised for this protection to apply¹.

The FSCS may secure the provision of a funeral due under a protected funeral plan contract on terms corresponding in all material respects to the original contract²¹. If it cannot do that, it must offer compensation instead or reduce future premiums to reflect the change in terms²¹. While seeking continuity, it may secure provision of a funeral regardless of whether the cost is more or less than paying compensation²¹.

If a plan holder passes away after their provider fails, before a replacement contract or compensation is secured, and the insolvency practitioner cannot secure provision of a funeral, the FSCS may be able to help with the provision of a funeral¹⁶. A customer's nominated representative or next of kin will need to contact the named funeral director in the original funeral plan, then notify the FSCS by phone, post or live chat¹⁶.

The FSCS cannot predict exactly how long a funeral plan claim will take¹. An average for funeral plan claims will be added as and when claims are processed¹.

Savings held in a bank or building society are protected separately under the deposit protection rules. The FSCS protects savings up to the deposit limit, and savings products structured as long-term contracts of insurance issued by regulated mutual insurers may be protected under insurance protection rather than deposits protection²². Unregulated savings schemes do not provide the same protections as regulated savings accounts²³.

Regulation and protection for funeral plan customers

Funeral plans became regulated by the FCA on 29 July 2022⁴. Before that date, the market was unregulated and customers had fewer protections. The change means that providers must meet FCA standards, and customers have access to the Financial Services Ombudsman and the FSCS.

The government consulted on amending the regulatory framework to ensure the FSCS can operate most effectively for consumers of pre-paid funeral plan contracts if a regulated provider fails²⁴. The consultation also sought to make it easier for funeral plan providers that seek to exit the market to transfer their existing contracts to another provider²⁴.

The FSCS may make a payment to or on behalf of the estate of an eligible claimant, or to any other person in connection with the provision of a funeral, on such terms and conditions as it thinks fit²¹. It may also secure a payment by the liquidator, administrator or provisional liquidator, trustees of a trust arrangement or insurer by giving an indemnity²¹.

For savings, protection comes from the deposit guarantee scheme. The FSCS protects eligible deposits up to the limit, and the rules are different from funeral plan protection. A savings account is a deposit; a funeral plan is a contract for a service. The two are protected under different parts of the FSCS framework.

The Financial Ombudsman Service handled 271 funeral plan complaints in the period from 9 July 2024 to 8 July 2025²⁵. In the first quarter of 2026/27, 35 pre-paid funeral plan complaints were opened²⁶. Those figures show that complaints do reach the ombudsman, and customers have a route to redress if something goes wrong.

Will savings set aside for my funeral affect means-tested benefits or care funding

Savings held in your name count towards means-tested benefits and care funding assessments in the usual way. If you are claiming means-tested benefits, the amount you have in savings can affect what you receive. The same applies to care funding assessments, where capital above certain thresholds affects how much you pay towards your care.

A pre-paid funeral plan is different. It is a product you have bought, not money you hold. It is not treated as savings in the same way, because the money has been exchanged for a contract for services. That distinction matters if you are approaching a care funding assessment or claiming means-tested benefits.

Some benefits are not means-tested at all. Bereavement Support Payment is not means-tested, so what you earn or how much you have in savings will not affect what you get²⁷. Pension Age Disability Payment is not means-tested, and it does not matter if the person applying is working or has savings²⁸. Carer's Allowance is not means-tested, so your savings and your partner's income are not relevant⁹.

Bereavement Support Payments will not affect other benefits you receive, but in some circumstances they may be treated as savings when applying for other benefits²⁷. Bereavement benefits are entirely separate from Social Fund funeral payments²⁹.

If you are considering how savings or a funeral plan might affect your benefits or care funding, free and impartial help is available from MoneyHelper³⁰.

Where to get help and how to complain

If you have a problem with a funeral plan provider, the first step is to complain to the provider. If you are not satisfied with the response, you can take the complaint to the Financial Ombudsman Service. The ombudsman handled 271 funeral plan complaints in the year to 8 July 2025²⁵.

If a provider has gone out of business, the FSCS handles claims. A customer's nominated representative or next of kin should contact the named funeral director in the original funeral plan, then notify the FSCS by phone, post or live chat¹⁶. The FSCS cannot predict how long a claim will take¹.

For government support, the Funeral Support Payment in Scotland can be applied for online, by phone or by paper form¹³. If you have travel costs for a funeral outside the UK, you will need to complete a local authority cost comparison and then raise a case query with the Decision Support Team³¹. For a telephone application, there is a dedicated route³².

In England, Scotland and Wales, you can call the Department for Work and Pensions Bereavement Service about the Funeral Expenses Payment. In Northern Ireland, you contact the Northern Ireland Bereavement Service³³. More information about Funeral Expenses Payment, and an application form, can be accessed at nidirect³⁴. You will need a copy of the funeral plan, funeral bond or other prepaid arrangement if one exists, and any letter from the plan provider about the amount to be repaid³⁴.

MoneyHelper provides free and impartial guidance on making your money easier to manage³⁰. For debt advice, free charities are available. The Financial Ombudsman Service is free to consumers.