Funeral plans – a bonfire of vanities

If you or a member of your family have taken out a pre-paid funeral plan, read on. Important information below!

On Friday last week, the crowded funeral plan landscape suddenly became a little less bustling. Quite a lot less, actually.

On 29^th July 2022, the  Financial Conduct Authority took on the regulation of the funeral plan market, and with immediate effect, almost two thirds of funeral plan providers have been refused permission to sell new plans, leaving just 26 funeral plan providers that will be authorised by the FCA.

There were, until 29^th July, around 70 companies selling funeral plans in the UK. Some large, with enormous amounts of money invested, some small. All were required to apply to the Financial Conduct Authority (FCA) for authorisation after the government legislated in January 2021 to bring pre-paid funeral plans into FCA regulation.

The market had been, until last week, completely unregulated, and over the years there have been various high-profile collapses of funeral plan providers, leaving customers who thought that their funerals were organised and paid for in the distressing position of finding out their money had been lost, and that there was absolutely no redress. 

The most recent company to go into liquidation is Unique Funeral Plans, which announced on 22^nd July that its 3,000 customers would not receive refunds, nor would their funeral plans be transferred to alternative providers. The previous week, on 14^th July, Not for Profit Funeral Plans Ltd was placed into liquidation with all funeral plans terminated with immediate effect.

This came just weeks after approximately 45,000 people who had purchased a funeral plan from Safe Hands Funeral Plans were told they could expect to receive back just 10% of the plan value by administrators, after that company collapsed into administration in March. 

Temporarily, Dignity Funerals Ltd has agreed to fulfil all funerals of Safe Hands funeral plan holders for six months from 11^th May 2022, and they are contacting all plan holders offering (for additional contributions) a replacement funeral plan from Dignity, see details here.

Curiously, at the same time, Dignity have paused their sale of funeral plans, quite a decision for a company that usually sells around 1,000 plans a week!!

Anyway, we digress. 

13 further plan providers that applied for FCA authorisation have not been authorised. These companies are permitted to continue administering existing funeral plans until 31^st October, but they are prohibited from selling any new plans. By 31^st October, they must transfer their plans to authorised firms or refund their customers. They are permitted to continue receiving instalment payments, if you already have a plan with them, and they should be contacting you to let you know what’s happening. Make sure you respond to any communication you receive where required. 

Plans offered by these 13 companies are not covered by FCA regulation, meaning there is no protection by the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) until they are transferred to authorised providers.

You can see the full FCA list here, showing the 26 companies that the FCA is authorising, the 13 companies that are permitted to continue administering plans and a non-exhaustive list of 10 companies that must not sell or administer plans. 

It is estimated that there are almost two million people in the UK who have taken out a funeral plan to cover the costs of their funeral, and 87% of this market (around 1.6 million plans) are provided by the 26 providers now authorised by the FCA, meaning that customers will now have access to the Financial Services Compensation Scheme, so their money is protected if their provider fails. 

Planholders with authorised companies can also make a complaint to the Financial Ombudsman Service even if the issue they are complaining about happened before July 2022 if the firm was registered with the Funeral Planning Authority (FPA) at the time the issue occurred.

The FCA will monitor adherence to the new regulations that have come into force, which include:

• A ban on cold calling.
• A ban on commission payments to intermediaries, such as funeral directors.
• A requirement for a funeral plan to deliver a funeral unless the customer dies within two years of taking out the plan, in which case a full refund will be offered.

Finally, it seems, purchasers of pre-paid funeral plans can have confidence that their chosen provider is both reputable and reliable, and that their money will be safe.

Here at the GFG we have a pretty jaded view of the entire principle of encouraging people to decide and pay for their funerals in advance, and we’ve written extensively about our misgivings. 

We have argued that advance payment ‘for peace of mind’, as it’s advertised, is actually entering into an expensive transaction that often leaves bereaved families without choice or control of an event that is supposed to be for them, not for the person who has died. Read this blog post from 2019 which shows just how unsatisfactory – and financially unbeneficial – a funeral plan can be.

We understand that many people worry about the costs of funerals, and that, for some, paying for their funeral arrangements in advance is an attractive prospect, particularly with the escalation in funeral costs that continue relentlessly year on year. Securing funeral services at today’s price seems both sensible and responsible, particularly for the prudent generation reaching their 80’s and 90’s, something that has not gone unnoticed by the marketing teams of funeral planning companies.

Until now, people purchasing pre-paid funeral plans have had to hope that their chosen plan provider was a secure and responsible entity, and that the ‘stress and worry of planning a funeral’ was all taken care of with the stroke of a pen on their cheque as they sent the forms back in the pre-paid envelope helpfully provided. There was, though, no guarantee of this.

Finally, with the oversight of the FCA now in place, people who want to settle their funeral arrangements in advance will be able to have confidence that their money is safe and that their decisions about their funeral will be carried out as they wish. 

This FCA safety net has been needed for a very long time, and we are relieved that it is now in place.