Funeral planning

FCA to take on regulation of prepaid funeral plans

FCA to take on regulation of prepaid funeral plans main image

Funeral plans have become big business over the last decade. With more than 160,000 sold every year, prepaid funeral plans appeal to people looking to arrange and pay for their own funeral in advance, removing the worry from family when the time comes.

Unfortunately over recent years, controversy over the lack of control and regulation has resulted in prepaid plans hitting the headlines for the wrong reasons. Claims of miss-selling, cowboy companies and families left with more to pay forced the treasury to act.

In January 2021, further to their investigations, the Treasury announced that from July 2022, the Financial Conduct Authority (FCA) will oversee the regulation of prepaid funeral plans, giving consumers and reputable funeral plan providers the much needed protection they deserve.

How are funeral plans currently regulated?

Currently the Funeral Planning Authority (FPA) oversees the regulation of prepaid funeral plans. They have a strict set of rules and code of practice that members must adhere to, regulating the way your money is held and the service families receive.

The concern is that funeral plan providers do not have to be become members of the FPA in order to sell prepaid plans. It is entirely up to the provider as to whether they apply or not. Thankfully leading providers such as Dignity, the Co-op, Golden Charter and Golden Leaves are all registered, so you can be reassured they work within the FPA’s controls.

The FPA list of registered funeral plan providers details which companies are members and therefore regulated. So if you are thinking of buying a plan, you may want to consider checking the list first.

What are the FCA’s plans?

Throughout their investigation, the treasury uncovered several concerns:

  • Customers had been misled and badgered into buying plans
  • They had not been made aware of plan limitations
  • Plans did not cover the full cost of a funeral
  • Large commissions paid to third party sales companies led to high pressure sales tactics
  • Poor governance and controls
  • Inadequate financial management of trust funds

It is important to point out that this is not a reflection of the whole market. In fact companies like Dignity have been leading the battle for greater regulation and oversight for many years.

Thankfully the clean-up operation is already well underway and some of the less reputable companies have already faced hefty fines for their poor sales practises, or been forced to cease trading altogether.

The FCA has three core objectives in its regulation of the prepaid funeral plan market:

  • To ensure funeral planning products meet the needs of consumers
  • That plans offer fair value and are sold fairly
  • That firms look after consumers’ money and use it to deliver the funeral services chosen

In addition to overseeing new sales activity, the FCA also propose that their controls and regulation will protect the rights of people who already have plans in place. Plus, under their regulation, consumers will have access to the Financial Services Compensation Scheme (FSCS) and the Financial Services Ombudsman should things go wrong.

What does this mean to the funeral planning market?

The FCA’s regulation of prepaid funeral plans begins on the 29th July 2022. Until then, the FPA will continue their role as industry regulator.

For companies to continue carrying out funeral planning activities, be it the management or sale of plans, they will need to be authorised by the FCA. Applications for authorisation will be invited from September 2020, so it is advised that companies wishing to continue trading apply as early as possible.

Carrying out FCA business without authorisation is a criminal offence, so if a company hasn’t got the FCA’s seal of approval by the end of July 2022, they will have to cease trading - a good incentive for any company to clean up its act.


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