Plain-English buyer guide · Australia 2026
Pre-paid funeral plans vs funeral bonds
Four ways to set funds aside for a funeral – pre-paid contracts, funeral bonds, ordinary savings and life insurance – with the regulator framework, the Centrelink asset-test exemption rules, what the ACCC has flagged about the industry and the actual differences in legal protection between them.
★Key takeaways
- ✓Pre-paid funeral = service contract with a specific funeral director, money in a trust. Funeral bond = financial product (APRA Friendly Society or life insurer), portable to any funeral.
- ✓Both are Centrelink asset-test exempt up to a combined $14,000 cap per person (2025-26, indexed). Confirm at servicesaustralia.gov.au.
- ✓Pre-paid funeral locks in 2026 prices. Funeral bond grows over time. Neither is guaranteed by the Commonwealth.
- ✓Transferability is the catch with pre-paid: contracts often nominate a specific funeral home and may not be portable interstate or to a different provider.
- ✓Funeral insurance is generally a poor product. ASIC has warned that consumers commonly pay more in premiums than the payout. Term deposit or funeral bond is usually better value.
- ✓The ACCC has flagged the funeral industry for pricing transparency concerns. Always demand an itemised contract before paying.
Side-by-side
The four options compared
| Feature | Pre-paid funeral | Funeral bond | Savings / term deposit | Funeral insurance |
|---|---|---|---|---|
| What it is | Service contract with a specific funeral director | Investment with APRA Friendly Society / life insurer | Ordinary bank deposit | Insurance policy, monthly premium |
| Locks in price? | Yes – 2026 prices for future service | No – value grows, prices not locked | No | No |
| Portable to any funeral home? | Often no – read the contract | Yes – fully portable | Yes | Yes – cash payout to estate |
| Centrelink exempt? | Yes (no $ cap, must be paid in full) | Yes, up to $14,000 cap (2025-26) | No | Premiums not exempt |
| Regulator | State funeral funds Act + state regulator | APRA (Life Insurance Act) + ASIC (AFSL) | APRA banking regime | APRA + ASIC |
| Government guarantee? | No | No | Yes – $250k FCS deposit guarantee | No |
| Provider insolvency risk | Trust funds should refund, not guaranteed | Friendly Society capital regime; low | Negligible up to $250k | Policy may lapse, premiums not refunded |
| Best for | Locking in exact service with a long-trusted local funeral home | Setting funds aside flexibly while qualifying for the asset-test exemption | Maximum control + flexibility, if asset-test exempt status not needed | Generally not recommended (ASIC concerns) |
Sources: ASIC MoneySmart; Services Australia; APRA Life Insurance regulatory framework.
Centrelink rules
The $14,000 asset-test exemption
Funeral bonds and pre-paid funerals get special treatment under the Age Pension assets and income tests. Services Australia administers the exemption under the Social Security Act 1991.
Pre-paid funeral contracts: fully exempt from the assets and income tests, regardless of amount, provided the funeral has been paid for in full. The contract must be with a registered funeral director and specify the services to be provided.
Funeral bonds: exempt up to a combined cap of $14,000 in 2025-26 (indexed each 1 July). The cap applies per person, not per couple. Two members of a couple can each hold a $14,000 exempt funeral bond.
What this means in practice: shifting $14,000 from an ordinary savings account into a funeral bond can increase your Age Pension by reducing assessable assets. The same is true for shifting savings into a pre-paid contract. The amount of pension uplift depends on where you sit relative to the pension assets-test thresholds.
Confirm the current cap: servicesaustralia.gov.au – funeral bond and pre-paid funeral asset and income test exemption.
Industry context
What the ACCC has flagged
The ACCC has examined the Australian funeral industry on several occasions, most prominently in the 2020 FuneralCare investigation. Recurring concerns:
- Price opacity. Many funeral directors do not publish itemised price lists. The ACCC has urged greater pricing transparency. Some states (NSW from 2026) require itemised disclosure.
- Industry concentration. Two listed corporations (InvoCare, ASX:IVC, since taken private by TPG; and Propel Funeral Partners, ASX:PFP) operate a large share of branded local funeral homes. The corporate ownership is often not obvious from the brand name.
- Coffin mark-ups. Coffins are commonly the highest-margin line item. The ACCC has highlighted that consumers are not always told they can supply their own coffin.
- Pre-paid contract terms. Some pre-paid contracts are non-transferable or limit refunds. The ACCC and consumer advocates have called for stronger consumer protection.
Practical reading: confirm whether your local funeral director is independently owned or part of InvoCare or Propel. Ownership does not predict service quality, but it is a relevant disclosure for many families.
Decision framework
Which option suits which situation
You are over 70, own your home, on the Age Pension
Funeral bond up to $14,000 is the standard recommendation. Asset-test exempt, fully portable, low-cost. If you have a strong relationship with a specific local funeral home, a pre-paid contract may be preferable, with the contract terms checked carefully for portability.
You are 50-70, working, no pension yet
A savings account or term deposit usually wins on flexibility. Funeral bonds have a place if you are committed to the asset class; the asset-test exemption only matters once you are pension age.
You have a terminal diagnosis
A pre-paid contract directly with a funeral director can take a significant burden off your family. Choose a long-established independent or a major brand and read the contract carefully. Confirm the trustee.
You hold funeral insurance and are wondering whether to keep it
Compare total premiums paid to date and total expected premiums to your projected funeral cost. ASIC has repeatedly warned that funeral insurance commonly costs more in premiums than the eventual payout. Read moneysmart.gov.au/insurance/funeral-insurance before cancelling.
Common questions
Pre-paid funerals + bonds – common questions
What is the difference between a pre-paid funeral and a funeral bond?
A pre-paid funeral is a contract with a specific funeral director to deliver specific services at today’s prices when you die. The money sits in a regulated trust until then. A funeral bond is an investment vehicle (issued by an APRA-regulated Friendly Society or life insurer) that grows over time and is paid out to whoever arranges the funeral. Pre-paid locks in a service; a bond accumulates money. They are not interchangeable.
Are pre-paid funerals and funeral bonds exempt from Centrelink asset tests?
Yes, up to a combined cap of $14,000 in 2025-26 (indexed annually) per person. A pre-paid contract is fully exempt regardless of price. A funeral bond is exempt up to the cap. Anything above the cap counts as an assessable asset and can reduce your pension. Source: Services Australia, "Funeral bond and pre-paid funeral exemption". Confirm the current cap at servicesaustralia.gov.au before making a decision.
What happens if my pre-paid funeral provider goes broke?
Pre-paid funeral money is required by state law to be held in a trust, not on the funeral director’s balance sheet. If the funeral director collapses, the trustee should refund the money or transfer the obligation to another provider. State legislation varies (Funeral Funds Act 1979 NSW, Funeral Services Act 2003 SA, similar in other states). It is not, however, guaranteed by the Commonwealth. There have been historical provider collapses; the ACCC has flagged industry concentration and consumer protection as ongoing concerns.
Can I transfer a pre-paid funeral to a different funeral director?
Sometimes. Transferability depends on the contract you sign. Pre-paid funeral contracts often nominate a specific funeral home and may not be portable. If you move interstate or change your mind, you may lose value, pay an administrative fee or be unable to transfer at all. A funeral bond is fully portable because it is a financial product, not a service contract. Read the contract before signing and ask explicitly about cancellation and transfer.
Is a funeral bond regulated?
Yes. Funeral bonds issued by Friendly Societies are regulated by APRA under the Life Insurance Act 1995. Bonds issued by life insurance companies fall under the same regime. The issuer must hold an AFSL (Australian Financial Services Licence) under ASIC. You can check an issuer’s licence at asic.gov.au/professional-registers.
Should I use a savings account instead?
For many people, yes. A dedicated savings account or a basic term deposit gives you full control, full visibility, no provider-insolvency risk, no contract lock-in and full flexibility about how the money is used at the time. The downside: any balance above ~$2,000 is assessable for Centrelink purposes, you may spend the savings before the funeral is needed and there is no inflation hedge if your nominated funeral home raises prices. The trade-off is real and depends on your circumstances.
Is life insurance a good way to cover a funeral?
It can be, but funeral-specific life insurance is one of the most expensive ways to cover a $10,000 cost. ASIC has repeatedly flagged "funeral insurance" as a product where consumers regularly pay more in premiums over time than the policy ultimately pays out. Standard life insurance is more cost-effective if you need cover. ASIC’s MoneySmart page on funeral insurance is worth reading: moneysmart.gov.au/insurance/funeral-insurance.
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