Pre-paid funeral payments at risk

A REPORT into the funeral plan market warns that families could be left out of pocket after flaws were uncovered in the way the industry is run.

the funeral plan industry should be regulated by the Financial Conduct Authority. It should also be part of the Financial Services Compensation Scheme to protect people against a firm going bust.

And those taking out plans should be able to take complaints against firms to the Financial Ombudsman.

Simon Cox, head of Dignity’s insight and external affairs, said: “The sector is evolving into a twotier market. There are those committed to offering quality products and services, versus those willing to ‘sell at all costs’, without strong governance or worry about fair customer outcomes.

“We believe a governance gap is responsible for an explosion of online and telesales organisations who have moved on from PPI and accident claims into funeral plans.

“Our worry is that this situation is not sustainable, and before too long poor practice will result in one or two struggling to fulfil their obligations, leaving the rest of the sector to deal with the debris.” over the past decade, and pre-paid plans can be a great way of locking in today’s prices while also ensuring your family isn’t left with this significant financial burden after you’ve gone.

“Although there are some reputable providers working in the interests of consumers, the sector has rapidly expanded over the last few years. Our research reveals a worrying number of conduct issues and a lack of consumer protection.

“There is a concern that client money is not always being adequately looked after. Without intervention, we may yet see a Farepak-style collapse in this market, which leaves thousands out of pocket.”

The report, carried out independently by Fairer Finance and funded by Dignity, one of the largest funeral plan providers, says something needs to be done – and fast – to prevent families losing money. It recommends

Client money isn’t being adequately looked after. A collapse of this market could see thousands out of pocket

Consumer group Fairer Finance, which campaigns to ensure financial products work well for customers, carried out the research which highlights major problems.

It is calling for stronger regulation to protect the 1.2 million people who have taken out plans and pre-paid the cost of their funerals.

It says that despite funeral plans looking and feeling like a financial services product, the industry is not regulated by the Financial Conduct Authority.

This leaves people, who are paying out sums around £4,000, with virtually no protection should a firm go bust.

While some providers have signed up to voluntary regulation by the Financial Planning Authority, there are firms who haven’t.

Funeral plan companies have to put customer money into a trust or life fund. But few providers are transparent about their funding levels and where the money is invested – or how much they take for fees and commissions.

Fairer Finance says some firms are taking big chunks – sometimes half the cash paid upfront – and this could leave a shortfall when the time comes to actually pay for a funeral.

James Daley, managing director and founder of Fairer Finance, said: “Funerals have become ever more expensive