Family and friends in the UK have spent collectively £4.8 billion on funerals for their loved ones over the last five years, according to a new study from British Seniors Insurance Agency.
To fund these funerals 2.7 million people have taken out some form of finance (credit cards, personal loans and payday loans) spending £1.6 billion.
The research shows that people who are funding the cost of funerals for family and friends are mainly dipping into their own pockets (16%), spending £936 million collectively over the last five years. Personal savings are also taking a big hit as people have withdrawn £870 million from nest eggs because life cover, funeral cover or other provisions have not been put in place. In total, 27% are paying for funerals out of their own pocket or their savings.
The new research also reveals that of the 2.7 million people who have had to spend £1.6 billion on some form of finance in the last 5 years, 1.2 million people have taken out payday loans in order to pay for the funeral of a loved one, borrowing an average of £576 million, and £485 million has been spent on credit cards. When looking across the country at consumers who took some form of credit or finance to pay for a funeral, Londoners top the table with 39% of those in the capital taking out a payday loan (borrowing £256 million) and 40% taking out a new credit card, spending £183 million on credit cards in total.
18-34 year olds are the most affected, having to take out finance to pay the cost of funerals for their family and loved ones, with almost half (44%) using or taking out a credit card and a quarter (27%) using payday loans. The 18-34 age group have borrowed £464 million from payday loan companies in the last five years and have spent £338 million on credit cards to cover the cost of funerals. They are also the generation who are most responsible for managing the affairs of a loved one with a quarter (25%) taking on the role of organising everything from possession, clearance and sale of the home, executing a will and administration tasks such as sorting post, closing bank and phone accounts as well as money.
When asked to imagine that they were responsible for the funeral of a relative or loved one tomorrow, 40% of UK adults assume the cost of the funeral would come out of the estate or would be otherwise covered, while 23% think that they would have to pay out of their own pocket or savings. Only 2% anticipate they will have to pay by credit card or payday loan and 17% don’t know how the cost will be covered. The proportion who don’t know how these costs will be covered rises to 25% for the 18-35 year olds who are the most affected.
In the research UK adults estimated on average that the cost of a funeral is £3,733, however those who have had to pay for a funeral had to pay significantly more with a total average spend of £4,136. Loved ones could be badly out of pocket if the worst were to happen, as only 21% of UK adults have life or funeral cover in place to cover the costs of their funeral. Londoners are more unprepared for the costs of their funeral to be covered, whilst those outside of the South are the most prepared, with those in the North East (27%) most likely to have life insurance in place followed by 26% of Scots.
British Seniors Insurance Agency looked at the average funeral cost over the next ten years using calculations based on the forecast CPI. The costs of funerals are set to go up by 22% (to £5,066 from £4,136 this year) by 2026 as they rise in line with inflation.
Dave Sutherland, managing director of Neilson Financial Services, said: “The emotional impact of losing a loved one is devastating and it is only exacerbated when a family member or friend has to deal with not only managing the affairs but also having to pay the funeral costs. Our research reveals that many, particularly the younger generation, have to resort to forms of credit resulting in their grief being made worse at what is already a difficult time.’’
“At British Seniors Insurance Agency, our focus is on our customers and doing the right thing by them. Our customers tell us the last thing they want when they die is for their loved ones to be left in debt paying off their funeral. That’s why at British Seniors Insurance Agency we offer great value and fully flexible Over 50s life cover – and with the new Lifetime Payback Guarantee we ensure customers get full value for their hard-earned cash as they will never get back less that they’ve paid in. We want to encourage people to make sure that they have some form of life insurance or cover in place so as to provide peace of mind that when the inevitable happens they’ve got it covered for their loved ones.’’