Funeral market comes under spotlight from CMA and Treasury
13 June 2018
The Competition and Markets Authority is set to launch a review into the £2bn funerals market, examining both the cost of funerals and the information provided by funeral directors on prices and services.
The average cost of a funeral totaled nearly £3,800 in 2017, not taking into account extras that can add a further £2,000 to the bill.
Daniel Gordon, senior director of markets at CMA, said in a statement: “We think it is important that – at what can be a particularly challenging time – the process is made as easy as possible. As part of this study, we want to ensure that people can at least receive clear information on prices and the services making up a funeral, and that people get a fair deal on the cremation fees charged.”
Aegon said it welcomed the investigation, stating that people would feel “comforted” to know they are not paying more than they should for funeral costs at a time when they’re particularly vulnerable.
Simon Jacobs, head of claims and underwriting at Aegon, said: “As a life insurance provider we see first-hand the stress the cost of a funeral can cause bereaved families. For those who have lost a loved one and are coping with the heavy and emotional task of both putting financial affairs in order while ensuring their last wishes are met, the cost of a funeral can often come as an additional and unexpected shock.
Jacobs said bereaved families are often at a loss as to how to cover the cost of a funeral at such short notice. With the cost of funerals rising over the years, Aegon pays the family’s funeral director or home up to £10,000 in advance on all valid life insurance claims without waiting for probate where it can.
He added: “We know some people don’t have wills or plans for their passing away, resulting in loved ones getting caught out by funeral bills they weren’t expecting. This payment will help families avoid getting themselves into debt paying for a funeral they may never have expected to have to pay for, while they are waiting for the full life claim payment to be paid out.”
In parallel to the CMA review, HM Treasury is launching a separate Call for Evidence on regulation in the pre-paid funerals sector.
Rachael Griffin, tax and financial planning expert at Old Mutual Wealth, said: “The grieving process generally doesn’t include panic about money problems, but this is becoming a very real issue for many families. Scammers have latched onto these plans over the past year as an opportunity to swindle people out of their money and we welcome the suggestion that the sector become regulated by the FCA.”
Griffin said funeral plans are popular in part because of the probate process. Under this process money from the deceased’s estate has to go through probate first so tax is paid before it is distributed, which can take several months or even years to complete. For those nervous about funeral plans there are alternatives, such as a life assurance policy.
Griffin added: “The Office of Tax Simplification is considering the probate process as part of its review of inheritance tax and it will be intriguing to see if they decide to make changes to the system. The rationale for the process is it ensures that IHT is paid before assets are distributed, which avoids tax needing to be recovered later. Changing the system may prove to be complicated and put more of an onus on the executor of an estate to ensure that beneficiaries pay up.”
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