Many Australians set money aside for their funeral in advance, but the two most common ways of doing this — a prepaid funeral plan and a funeral bond — work quite differently and are treated differently by Centrelink. This guide explains both, with a particular focus on how funeral bonds work.
Trying to locate a bond or plan a family member set up? My Funeral Care can help you trace it — start your search here or call 1300 402 236, 24/7.
Prepaid Funeral Plan vs Funeral Bond: The Key Difference
- A prepaid funeral plan is a contract with a specific funeral director for a defined set of services, paid in advance at today’s prices. The services are locked in with that provider.
- A funeral bond is a financial investment — typically through a friendly society or life insurer — where money is set aside specifically for funeral costs, but isn’t tied to any particular funeral director. The bond grows with interest and pays out on death.
In short: a prepaid plan buys a service; a funeral bond sets aside money that can be used with any provider once the time comes.
What Is a Funeral Bond?
A funeral bond is a managed investment offered by a friendly society or life insurance company. You contribute either a lump sum or regular payments, and the funds grow with interest over time. The bond only pays out on the death of the person it’s held for — it can’t be accessed earlier.
Because a funeral bond isn’t attached to a specific funeral director, it offers more flexibility than a prepaid plan: your family can use the payout with whichever provider they choose at the time.
How Funeral Bonds Affect the Age Pension
This is where funeral bonds differ significantly from prepaid funeral plans, and it’s worth understanding before choosing between them.
Prepaid funeral expenses are generally exempt from Centrelink’s income and assets tests, with no upper limit — provided you have a contract confirming the funeral is paid in full.
Funeral bonds, on the other hand, are only exempt up to a set limit, known as the Funeral Bond Allowable Limit. As at 1 July 2026, this limit is $16,250 per person, reviewed annually each July in line with the cost of living. You can hold up to two funeral bonds, but the combined amount invested must stay under this limit for the exemption to apply. If a couple jointly owns a single bond, it’s treated as one bond — the limit isn’t doubled.
Any amount invested above the threshold is assessed as a financial asset under Centrelink’s usual rules, which may affect pension entitlements. If you’re weighing this up, it’s worth speaking with a financial adviser or contacting Centrelink’s Financial Information Service before deciding how much to invest.
Choosing Between the Two
Some things worth weighing up:
- Flexibility: A funeral bond can be used with any funeral director; a prepaid plan is locked to the specific director you signed with.
- Price certainty: A prepaid plan locks in today’s prices for the services agreed, regardless of future cost inflation. A funeral bond’s value depends on how it grows relative to future funeral costs.
- Pension impact: Prepaid funerals have no exemption cap; funeral bonds are only exempt up to the current threshold.
- Portability: If you move interstate or your circumstances change, a funeral bond generally travels with you more easily than a plan tied to a specific local provider.
Neither option is universally “better” — it depends on your circumstances, whether you already know which funeral director you’d like to use, and how much you’re setting aside.
What If You Can’t Find the Paperwork?
It’s common for family members to know a bond or prepaid plan exists without having the details — particularly with older policies, or if the original provider has since merged or changed names. If you suspect a funeral bond or prepaid plan exists but can’t locate it, see our guide on finding a lost funeral bond or plan.
Frequently Asked Questions
Can I have both a funeral bond and a prepaid funeral plan?
Generally no — if you have a prepaid funeral arrangement, your funeral bonds are not eligible for the assets test exemption. It’s one or the other for exemption purposes.
Do I need to tell Centrelink about a funeral bond?
Yes. You must declare any funeral bond you own, even if you know it’s exempt from the assets test.
Is a funeral bond regulated?
Funeral bonds are typically offered by friendly societies or life insurers, which are regulated financial entities. This differs from some historical prepaid funeral schemes, which have faced regulatory scrutiny in parts of Australia — it’s worth checking a provider’s credentials before investing.
What happens to a funeral bond if the provider closes down?
This depends on the specific provider and how the fund is structured. It’s a good question to ask directly before investing, along with a financial adviser if you’re unsure.
Can the funeral bond payout be used with any funeral director?
Generally, yes — this is one of the main advantages of a bond over a prepaid plan tied to a specific director. Compare funeral directors in Australia to see independent options in your area.
How My Funeral Care Can Help
We provide general information to help you understand your options — we’re not financial advisers and don’t recommend specific bond or investment products. What we can help with:
- 24/7 phone support from the moment you need it
- Independent guidance on funeral arrangements, with no pressure to choose a particular provider
- Help with paperwork — certificates, forms and notifications
- Help tracing lost or forgotten funeral bonds, prepaid plans, and insurance policies
Call 1300 402 236 any time, or compare funeral directors and costs through eziFunerals to see your options first.
Not sure what to do next? Read our full checklist for what to do when someone dies, or if you’re trying to trace an existing bond or plan, see our lost funeral plan search guide.