Incentivised Funeral Savings Scheme pilot: qualitative research - full report

Background and context

Policy background

In 2016, Citizens Advice ScotlandReview for Scottish Government on Funeral Poverty in Scotland undertook a ^[1]. The report offered a number of recommendations on how funeral costs could be controlled, and families given more ability to arrange a respectful funeral at an affordable price. One recommendation was that the Scottish Government (SG), “explore the possibility of developing a Scottish Funeral Bond Scheme”.

Following this, in August 2017, the SG published the Funeral Costs Plan^[2], an action plan to tackle funeral poverty and make more affordable funeral options available. This included, “options to help people save for their funeral by piloting a Scottish funeral bond”. In delivering this commitment, SG is moving towards an incentivised funeral savings scheme, rather than a traditional bond. In part this is because the government’s capacity to create such bonds is restricted, but mainly because the government recognises there are already a number of insurance products and pre-payment funeral plans on the marketm and does not wish to duplicate existing provision.

The incentivised funeral savings scheme (IFSS) is designed to encourage and incentivise people who have not made financial provision for their funeral to start to make long-term savings for it, reducing the debt that their family may face when the time comes to arrange their funeral. It is also envisioned that the scheme encourages long-term behavioral change to make saving for a funeral a habit.

While the scheme is still at an early stage of development, a number of features have been proposed:

• Targeted at people with low-to-middle incomes
• Targeted at people 40 years old and over
• Targeted at people who have not made financial provision for their funeral
• SG will match the amount saved by participants up to a specified amount. However, it is envisaged that the amount saved by participants in the long-term exceeds this figure
• Participants will be able to withdraw their savings at any time, and for any reason, though the SG contribution will be ring-fenced for funeral costs
• The pilot will be delivered through credit unions

Policy context

Research indicates that many people are unprepared for the high and rising cost of their funeral. According to the latest Cost of Dying Report SunLife from , the average total funeral cost in Scotland is £4,085, which is an increase of 13.4% from 2017^[3]. Increases in funeral costs are above inflation and are expected to continue to rise for the foreseeable future.On average, burial charges in Scotland increased by 5.5% and cremation charges increased by 3% between 2016 and 2017. As these charges are determined by individual local authorities they vary widely across the country. For example, in 2017, a burial in Edinburgh cost on average £2,340, compared to £705 in the Western Isles.

According to SunLife, 62% of people in the UK had put money aside to pay for their funeral before they died, 50% had savings and investments for this purpose, 30% had a funeral plan, 17% had a life insurance plan and 16% had an over 50s Life Insurance plan. In 33% of cases, however, there was no financial provision for the funeral, meaning those responsible for it, had to make their own arrangements to pay. Of those who had made financial provision, not all had enough money to cover the full costs of their funeral.

Many families of those who have not made adequate provision to cover the costs of their funeral may struggle with funeral costs. Since 1998 the Social Fund Funeral Payment (now the Funeral Expenses Payment) has been in place to help those that cannot afford to pay. It covers costs such as burial or cremation fees and provides up to £700 for any other funeral expenses. It is only awarded to those on qualifying social security support and in cases where there are no other funds available. As levels of financial support have not increased, while funeral costs have risen steeply, even those eligible for help are likely to be left facing costs.

In the UK, in 2018, 23% of those who struggled to pay for a funeral used a credit card, 21% borrowed from a friend or relative, 17% got a loan and 16% had sold belongings in order to cover costs ^[4][5].As well as debts, additional emotional costs are also reported, with anxiety over payment adding to the difficulty of the grieving process.

Research aims and objectives

This comissioned research was conducted on behalf of the SG by Progressive Partnership in order to inform the design and development of a pilot scheme to encourage funeral savings.

The overall aim was to strengthen understanding of the best format, delivery partners, and promotion mechanism for the IFSS. As the IFSS is targeted at adults over the age of 40 years with low-to-middle incomes, the objectives of this research were to explore the attitudes of individuals with those characteristics in the following areas:

• Funeral savings – knowledge of costs, current savings, motivators and barriers to saving
• Incentivised savings schemes - attitudes towards savings schemes generally and the IFSS proposed more specifically
• Delivery partners - knowledge and use of credit unions and opinions on other potential partners
• Promotional mechanisms - opinions on successful ways of promoting financial products linked to funerals

The specific objectives are set out in Table 1 below. In addition, the research intended to draw out any variations in attitudes between research participants, such as any differences according to age, gender or location.

Table 1: Project objectives