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FCA announces new rules for regulation of prepaid funeral plans

FCA announces new rules for regulation of prepaid funeral plans main image

The Financial Conduct Authority has just announced its plans for taking over the regulation of prepaid funeral plans in July 2022. These new rules will ensure all funeral plan providers are authorised by the FCA and conduct their business in line with their strict high standards.

Basically, from the 29th July 2022, it will be a criminal offence for companies who are not FCA authorised to carry out funeral plan contracts.

How are funeral plans currently regulated?

Funeral plans are currently regulated by the Funeral Planning Authority, a body set up by the industry to govern the provision and sale of prepaid plans. Members must demonstrate the service they offer is in line with the FPA’s strict rules and code of practise and that your money is held securely.

The main issue here is there is no legal requirement to be a member of the FPA, so authorisation is not a compulsory. Thankfully the FPA’s list of members clearly shows which companies are regulated, so you can easily check which plan providers have their seal of approval. 

Why are the FCA taking over regulation of prepaid plans?

As documented in my Linkedin article in October 2016, I have for many years been an advocate of the FCA overseeing the regulation of prepaid plans. Poor practices have resulted in customers being miss-sold plans and pressurised into buying, whilst unreputable intermediaries and brokers have been paid exuberant amounts of commission.

Thankfully the Treasury acted and further to its investigation into bad practises within the industry, proposed the transfer of regulation to the FCA.

What are the FCA’s plans?

Further to the Treasury’s investigation into prepaid funeral plans, it was agreed that from July 2022, regulation would be overseen by the FCA. Their new rules will underpin their three main objectives:

All funeral plans must be:

  • Sold fairly
  • Perform as expected
  • Provide value for money

Moving the regulation of prepaid funeral plans to the FCA means activity will fall under their ‘advising and investments’ permissions. As a result, firms advising on prepaid plans will be required to hold this permission.

How will the FCA regulate funeral plans?

The FCA is still developing the rules and standards for the regulation of funeral plans, however their recent announcement sets out the following principles:

  • All funeral plan providers must be authorised by the 29th July 2022 – companies who do not have the correct permissions by this date have to cease trading.
  • Cold calling will be banned – no unsolicited calls regarding the promotion of prepaid funeral plans will be allowed.
  • Commission payments to intermediaries are banned – companies will no longer be able to pay third parties for funeral plan sales.
  • The cooling off period will be set to 37 days – once they have purchased a plan, customers will have 37 days during which time they can change their mind and receive a full refund of any money paid.
  • Instalment funeral plans must honour the funeral services provided in the plan – if you die after 24 months of buying an instalment funeral plan, the provider must honour the services without asking family to cover any outstanding costs. If you die within the first 24 months, the money paid into the plan would be fully refunded.
  • Funeral plans will be covered by the Financial Services Compensation Scheme – so you will be protected if the company you have chosen ceases operating.

The FCA are currently working through the detail of this cover but essentially it will ensure the FSCS will:

  • Enable contracts to be transferred to a new provider where possible
  • Arrange continuity of the contract
  • Pay appropriate compensation if a company is not able to meet its liabilities

Although these new rules will not be in force until July 2022, some providers have already started making changings. For example cold calling is a thing of the past for many leading plan providers and companies such as Dignity and Co-op have been providing guaranteed instalment funeral plans for some time.

What happens next?

Companies will be able to apply for authorisation from the 1st September 2021, so it’s fair to say that the next year will be a busy one for the FCA and plan providers alike.

Of course, throughout these changes, sales of funeral plans will continue under the watchful eye of the Funeral Planning Authority. So if you are considering putting plans in place, check the company you choose is an FPA member and make sure you fully understand what services are and are not included in the plan.


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