The pre-paid funeral plans market, which now sees in excess of 250,000 plans being sold each year, has seen a recent high-profile failure in the administration of Safe Hands Funeral Plans which had approximately 46,000 customers and further failures are expected. Pinsent Masons is advising the joint administrators of Safe Hands Plans.
The government is keen to ensure that, when providers become insolvent, the FCA and the Financial Services Compensation Scheme (FSCS) have the powers that they need to allow for continuity of cover to consumers and to permit swift recovery by the FSCS where it has made compensation payments to consumers.
Directors of funeral plan providers that will not be able to obtain FCA authorisation will also need to be aware of their duties to customers and other creditors, and their book of funeral plans may need to be transferred to an alternative provider in advance of 29 July 2022.
Government regulation of the pre-paid funeral plan sector is much needed given a number of the businesses that operate within it receive large sums of money from often vulnerable consumers and the contracts that underpin funeral plan arrangements including the trust deeds and insurance policies are often complex.
Supplementary provisions introduced by the government will also place a positive duty on insolvency practitioners to comply with the FSCS if they are appointed over regulated providers.
What is a pre-paid funeral plan?
A pre-paid funeral plan allows an individual to pay for their funeral in advance. The customer pays a set amount to a funeral provider either by way of a lump sum payment or by instalments. In return, the funeral provider agrees to provide or pay for that customer’s funeral on their death. These plans are generally bought by consumers that would like assurance that they will receive the funeral of their choice and to remove the financial burden of paying for a funeral from their loved ones.