Paul Avis
   

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Google and the local press can occasionally throw up a link that demands a second look. For me it was a story in the Torquay Herald Express about a crowd-funding site set up after a young woman was killed in a stabbing. Her friends and work colleagues are trying to raise money to pay for the funeral costs.

This dramatic and rare situation helps to illustrate  the potential financial needs a death may create. This demand is clear with over 50’s as  funeral plans continue to do good business. But for the younger ages insurance is usually sold alongside mortgages and to protect family meaning there is a potential gap for the single renters.

Costs of a funeral
The basic funeral requirement is know as a “disposal arrangement”. In practice this means a funeral with an average cost of £4,100 or a cremation costing about £3,300. The person who engages the undertaker is responsible for paying the bill. In many circumstances the costs will be recovered from the estate but this is not always possible.

It is not always clear who is responsible for making arrangements. Where there is a will the executor will be appointed. Otherwise the Good Funeral Guide suggest that common law from 1840 says “It would seem that the individual under whose roof a poor person dies is bound to carry the body decently covered to the place of burial.”

Landlords may be relieved to know that to date there have not been any challenges to force them to take responsibility for a corpse. Hospital or local authority nursing homes are regarded as residences so they will make suitable arrangements if necessary.

Government funded
If no-one can be found to make the funeral arrangements the local authority must take over. Historically this has been called a pauper’s funeral but it now more likely to be a cremation. There will be no memorial such as a headstone. According to BBC research this process now costs councils over £1.7 million a year, up by 30% in 4 years. The councils are likely to try to recover costs from the estate, or the executor or by sale of the deceased’s property or personal effects.

There is the potential for financial support from the government, via the Social Fund. This Funeral Payment could meet a proportion of the costs, limited to:-

  • Burial or cremation fees
  • Up to £700 of the funeral costs
  • Travel to get to the funeral
  • Moving the body for the part of the journey which is over 50 miles

To qualify the claimant must be the partner, parent or a close relative or friend of the deceased and on income related benefits. Importantly if there is anyone in these categories who is not on one of the qualifying benefits then a Funeral Payment may not be granted. The claim must be submitted within three months and the decision on whether someone qualifies is decided by the DWP. Having sorted out the disposal there may be other money worries for family and friends. Dependants are obviously at risk, but others could be affected. An example would be people sharing rented accommodation who may face bigger bills in the short term or other family members pressured to cover outstanding loans.

Bereavement payments
There is limited government assistance available in the form of Bereavement Payments. These have recently been reviewed and will be changing from April 2017; however a select committee of MPs have pointed out that there remain significant gaps.

The current benefits available under State Pension age are:-

  • £2,000 one-off tax free lump sum to a spouse or civil partner – but not a cohabitee
  • Up to £112.55 per week payable to a surviving spouse or civil partner whilst entitled to Child Benefit.
    • This is not payable if there was not a marriage or civil partnership BUT
    • It will cease on remarriage or starting cohabitation
  • If over age 45 an age-related payment of up £112.55 per week payable for 52 weeks. Again this is only payable to a widowed spouse or civil partner without dependent children.
  • The weekly payments are subject to Income Tax and dependant on the amount of National Insurance contributions paid by the deceased.

From April 2017 the structure will be called Bereavement Support Payment offering:-

  • Eligibility will still be limited to a surviving spouse or civil partner, and the deceased must have paid sufficient national insurance in the previous year
  • If there are dependent children the payment will be around £5,000 plus 12 monthly payments of about £400
  • If there are not dependent children the payment will be around £2,500 plus 12 monthly payments of about £150
  • All payments are tax free, not means tested and are disregarded for the purpose of Universal Credit
  • Remarrying or cohabiting will not affect payments
  • The age of the claimant will not affect payments.

The key omission is there is no cover of cohabitees, even if there are dependent children. And of course the single people in our case studies will still leave behind family and friends.

Tax efficient employee benefit
Often obtaining individual insurance cover for relatively small amounts can be difficult. It is not cost effective for an insurer to offer a product where premiums are too low, so perhaps it is not surprising that recent research by the Syndicate, Protection review found that 34% thought Protection insurance was a luxury.

Costs of funerals do not have to fall on family, friends and work colleagues. Employers can offer Group Life Assurance to their employees as a cost effective and tax efficient benefit that often requires no individual medical underwriting and means that should the worst happen their family  would be assisted financially.

1 https://www.royallondon.com/Documents/PDFs/2015/10299-Funeral%20Report%2052pp%20FINAL.pdf/

2 http://www.goodfuneralguide.co.uk/wp-content/uploads/2010/04/Your-legal-rights-and-responsibilities-att-doc-41.pdf

3 http://www.bbc.co.uk/news/uk-34943805

4 http://www.bracknell-forest.gov.uk/funeralnationalassistance

5 https://www.gov.uk/funeral-payments/what-youll-get

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/473680/bereavement-benefit-reform-ssac-op16-nov-2015.pdf

7 \\BIDNTFS2\GROUP\Marketing\Research\Standalone Research\Downloads\160620 The Syndicate Synopsis 2016 protection sales.pdf