Pre-paid funeral managed funds, now holding assets totalling sixty million dollars on behalf of some 7000 customers with many having differing contractual rights on death, have been consolidated by High Court order into one fund, with leeway given for individual customers to get their money back now if they do not like the new scheme.
This consolidation follows ongoing corporisation of the funeral industry as family-owned businesses sell up.
For funeral directors, pre-paid funerals locked in future business, discouraging estate executors from going elsewhere on death of a customer. Pre-pay plans sold to customers as protection against future cost increases could see estate beneficiaries later disappointed, as further costs were added in for extras like live-streaming of funeral services, a facility which never existed when signing up.
Having to hold pre-payments in trust led to substantial administration costs for providers.
Pre-paid funerals were first offered en masse in the mid-1980s, backed by insurance cover taken out through nominated life assurers; cover no longer offered by life assurers since 2009.
The High Court was told there are still over 600 customers with live polices operating under this old scheme.
Since 2010, a Funeral Trust created by the Funeral Directors Association of New Zealand has managed funds held for pre-paid funerals, paying out to member funeral directors when a claim is made. Many different funeral plan versions are in existence, adding to administration costs.
To reduce costs, and to potentially improve returns for pre-paid customers, Funeral Directors Association got Trusts Act approval to transfer all customers to a new trust: Funeral Trust Services Ltd, which now has administrative responsibility for investing customers’ funds and payment of claims.
Terms of the High Court ruling see any surplus generated by Funeral Trust Services transferred to a charitable trust: The Charitable Funeral Trust. It was suggested to the High Court that discretionary grants from this charitable trust could be used to top-up funeral costs where there was a shortfall, to assist customer families in financial distress, and to improve public education about funeral traditions.
High Court approval was given for post-2010 pre-paid customers to be transferred across under terms and conditions of what was described as the ‘Now for Them’ plan.
Rights of pre-2010 old scheme pre-paid customers remain unchanged.
All pre-paid customers are given a grace period to back out.
Almost two per cent of pre-paid customers could not be traced; either moving without leaving a forwarding address, or deceased with no claim made.
Funeral Directors Association of New Zealand v. Funeral Trust Services Ltd – High Court (30.06.26)
26.194