In this morning’s (23 February 2022) story on BBC Breakfast about the forthcoming regulation of funeral plans, the Financial Conduct Authority highlighted the potential impact on consumers who have taken out funeral plans with plan providers that either do not become authorised to continue trading after July, or who choose to withdraw from the market – leaving some consumers at risk of losing some or all of the money they have invested.
If a funeral plan company decides not to apply to be authorised – or fails to secure authorisation – they cannot continue to either sell new plans or continue managing existing funeral plans from 29 July.
In these cases, ahead of July, the FCA requires them to make alternative arrangements for another plan provider to take over responsibility for the funeral plans they have sold. This is the preferred solution and we know that leading plan providers are agreeing to take on funeral plans under these conditions and affected consumers will be contacted about the transfer of their plans. This solution protects all or the majority of the value of the consumer’s investment – which may have been building for many years, in some cases.
A less preferable outcome is that the FCA has told plan providers that will not be authorised in July that they should refund customers before regulation comes in, although it should be noted that these refunds will have significant management fees deducted from them and for those plans taken out many years ago, will represent a fraction of what a funeral would cost in today’s money – so affected consumers will not receive the benefit of their investment and in some cases may receive little or no money by way of a refund.
After 29 July the Financial Services Compensation Scheme will cover funeral plans. however there is no protection currently provided ahead of 29 July where a plan cannot be successfully transferred to another provider.
In the programme, the FCA spokesman acknowledged that this may lead to consumers losing out, but it does not yet know how many. There is an impact too on funeral directors, who often only find out that a funeral plan has been allocated to them to carry out after the death of the plan holder.
The National Association of Funeral Directors and leading funeral plan providers have highlighted this issue to the Financial Conduct Authority countless times.
The NAFD is calling on the Government to make good the promise Treasury Minister John Glen MP made, in July 2021, to “stand ready to take any appropriate action” and work with the FCA to ensure consumers who, through no fault of their own, find themselves having a purchased a funeral plan that will not be able to be fulfilled when the time comes.
We are also calling on the FCA to make more information available so that it can be clear to consumers which companies have successfully secured authorisation.
Advice for consumers
The FCA said in the interview that funeral plan companies will be contacting customers to explain about FCA regulation and what it means for them. We are clarifying this point. Some people may already have be contacted with a request to transfer their plan to another provider who is seeking authorisation.
However, for anyone who is concerned, the NAFD offers the following advice:
- In the first instance, contact your plan provider and ask what steps they are taking in respect of your funeral plan ahead of regulation coming in, on 29 July.
- If you wish to do your own research, you can also check if the planning company has applied for authorisation on the FCA website here.
- If you do not get satisfactory answers from your plan provider, contact the Financial Conduct Authority here to find out what plans are being put in place to support affected consumers.
Advice for funeral directors
- Funeral directors are urged to make contact with their plan providers if they have not already done so. Not only do you need to know that they are applying to be authorised, you also need to be authorised and trained, by 29 July, to continue selling or introducing plans on their behalf.
- You are also advised to contact other plan providers to check if you have been nominated on other funeral plans without being informed, as we know this has been found to have happened frequently.