Treasury consults on pre-paid funeral plan sector

The Treasury is to consult on tougher regulation for the pre-paid funeral plan sector, including proposals to bring the market into the supervision of the Financial Conduct Authority (FCA), in a bid to protect grieving and vulnerable people from aggressive sales tactics and poor financial advice

The government says research conducted by Citizens Advice Scotland and Fairer Finance has revealed people being pressured, harassed and misled by some pre-paid funeral plan providers.

Approximately 95% of the funeral plan sector is voluntarily regulated by the Funeral Planning Authority (FPA), a self-regulatory body. The FPA does not have the power to prevent pre-paid funeral plan providers from trading, and while it does have a code of practice for its members, this is not legally binding.

John Glen, economic secretary to the Treasury said: ‘There are thousands of pre-paid funeral plans bought each year, and most providers are fair and legitimate. But tougher regulation will ensure robust standards are enforced for all plan providers, and protect individuals and their families if things go wrong.’

Demand for funeral plans has grown significantly in recent years, with annual sales up roughly 245% between 2006 and 2017, but the regulations have remained unchanged since 2001.  Members of the FPA have over 1.3m undrawn plans, equating to approximately £4bn in assets under management.

James Daley, managing director of Fairer Finance, said: ‘People who buy funeral plans are not around to measure delivery against their expectations, which is why it’s so important there are clear rules around how companies must behave. And with most plans costing over £3,000 – it’s important that customers can have total confidence that their money is safe.’

A funeral plan is a contract under which a customer makes one or more payments to a provider, who subsequently arranges or pays for a funeral upon the death of the customer. Providers either invest these payments in a trust fund or take out a form of insurance against the life of the customer. This enables customers to pay for a funeral in advance and safeguard against inflation.

Pre-paid funeral plans exhibit many of the characteristics of other financial services products, such as insurance products, which is why responsibility for the call for evidence is within the remit of the Treasury.

The consultation says the government’s overall objectives are that any regulation of this sector should seek to ensure that all pre-paid funeral plan providers are subject to robust and enforceable conduct standards; there is enhanced oversight of providers’ prudential soundness; and consumers have access to appropriate dispute resolution mechanisms if things go wrong.

Amongst the issue raised in the call for evidence are questions about how funeral plans are backed by insurance products, and the protection in place for consumers if a plan provider has insufficient funds to pay out for claims.

The call for evidence closes on 1 August. In parallel, the Competition and Markets Authority has launched a market study into the supply of funerals in the UK. 

Pre-paid funeral plans call for evidence is here: 

Details of the Competition and Markets Authority investigation into the funerals sector are here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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