Are funeral plans safe?

Updated 3rd May 2022

When you buy a funeral plan through a Funeral Planning Authority registered company, your money is protected by their rules and safeguards. From the 29th July 2022, prepaid funeral plans will be regulated by the Financial Conduct Authority. This means that all companies will need to be FCA authorised and conduct their business in line with their strict standards.

FCA regulation also means that for added protection, consumers will have access to the Financial Services Compensation Scheme (FSCS) and the Financial Services Ombudsman.

For more information on the proposed changes, read our ‘FCA announces new rules for regulation of prepaid funeral plans’ article.

The Funeral Planning Authority

Since its instigation by HM Treasury in 2002, the Funeral Planning Authority has been the industries regulatory body. There is no requirement for a funeral plan provider to become a member of the FPA but those that do, must demonstrate that they comply with their strict rules and code of practice.

In addition to the Funeral Planning Authority, there are other bodies and associates in operation however they tend to be more concerned with the quality of the service your funeral director provides as opposed to how your money is invested, managed and safeguarded.

How do funeral plans work?

Before understanding how funeral plans are regulated, you need to know how funeral plans work and what they do;

  • for an agreed sum of money you are purchasing your funeral services in advance at today' s prices
  • your money is invested in a trust fund (or an insurance policy for some plans) until the time comes
  • the trust fund is managed & audited independently from the plan provider 
  • the money isn't paid to the funeral director until the time of need

All these points ensure that your money is safe regardless of what happens to the prepaid funeral plan or direct cremation funeral plan provider or the funeral director, as in the event of the funeral director going into liquidation your money will be reallocated to an alternative local funeral director.

At around £3,600 for a traditional funeral plan and £1,495 for a direct cremation, they are a significant purchase and so you want to be sure that when you purchase a plan, that your family will receive the services that you have paid for.

How are funeral plans regulated?

This extract is taken directly from the FPA's website:

The broad purpose is to help ensure that money paid by the consumer to a funeral plan provider for the purposes of providing a funeral in the future is kept safely, and is available when the time comes for delivery of the agreed funeral in accordance with the plan specification. 

The effect of the regulation is that those plans which are structured in accordance with certain statutory criteria, are excluded from direct financial regulation by the Financial Conduct Authority

The detail of regulation of funeral plans is contained in articles 59 & 60 of The Financial Services & Markets Act 2000(Regulated Activities) Order 2001 

The most important point here is that the Funeral Planning Authority's key role is to ensure that your money is protected and held in trust, regularly audited and reviewed by an actuary - whose job it is to ensure that your money is well managed and will be available to pay for your funeral in the years to come.

Funeral plan trade bodies

There are other organisations, trade bodies and associations that plan providers and funeral directors belong to, some have been in existence for many years whilst some are relatively new so their longevity is unknown.

It's not uncommon for funeral plan providers and funeral directors to be associated and or members with more than one body..

  • National Association of Funeral Directors (NAFD)

The NAFD is the largest trade association for the funeral sector and is not to be confused with the NFFD that only represents one funeral plan provider and a small number of funeral directors.

The National Associationof Funeral Directors represents the funeral industry and lobbies the government on its behalf for funeral directors and the bereaved. Their membership conducts over 470,000 funerals every year.

It is an industry leader and sets high standards for the industry through a code of practice.

  • National Association of Allied & Independent Funeral Directors (SAIF)

The NationalSociety of Allied and Independent Funeral Directors (SAIF) is a trade association whose members are all independent funeral directors and was established in 1989.

They have over 860 members across 1,500 sites in the UK, plus they have over 100 associate members who supply products and services to the funeral profession.

Their primary objective is to promote and protect the interests of independent funeral directors.

  • National Association for Prepaid Funeral Plans (NAPFP)

The National Associationfor Prepaid Funeral Plans was established in 1993 and was instrumental in setting up the Funeral Planning Authority in 2002.

Members of the NAPFP are also funeral plan providers regulated by the FPA. Its Code of Practice for pre-paid funeral plans is to protect consumers who purchase prepaid plans and was drawn up in consultation with the Office of Fair Trading.

  • National Federation of Funeral Directors (NFFD)

The National Federation of Funeral Directors is a trade body and was set up in 2010. Safe Hands Funeral Plans work in partnership with the NFFD and is the only funeral plan provider endorsed by them.

The aims of this trade body is to increase funeral cost transparency and consumer choice.

So how secure are funeral plans?

Our advice is to ensure that your funeral plan provider is registered and regulated by the Funeral Planning Authority (FPA), as they are the only organisation focused on how your money is protected. The funeral plan provider has to demonstrate that they operate to the high standards required by the FPA’s Rules and Code of Conduct; maintain this level on an ongoing basis by having to re-register on an annual basis and carry out independent annual audits.

Here are some of the companies that are registered with the FPA: 

By placing your plan with an FPA registered provider your plan will automatically be placed with a funeral director (you can also nominate your choice) who is member of the NAFD and or SAIF member so you can be sure of the highest standards when the time comes. 

With all FPA plan providers your local funeral director will be stated in your plan documentation as they will have already accepted your plan from the plan provider.

From 29th July 2022 the FCA will be taking over regulation of funeral plans and so any plans purchased after this date will have all the safeguards as other financial service products.

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