Funeral plans: It’s not end of world

NEWS that some funeral plan providers are going bust has sparked understandable alarm.

Last week, a lady rang me about it on my LBC radio show and this provoked a flurry of other calls, texts and emails from listeners.

There are two main questions I’m being asked: are funeral plans safe and should I carry on paying into my plan?

Here’s what you need to know:

An unregulated sector

At present, there is only a voluntary quasi-regulator, the Funeral Planning Authority. Firms do not need to be a member and it has no statutory powers in any event.

The other major flaw with the FPA and the current state of this sector is there is no compensation scheme if firms fail.

What happens to your money?

With a funeral plan you are paying monthly for a future expense, just like Christmas savings clubs.

If operated properly, firms running funeral plans should put your money (less their fee) into a trust, which should be overseen by independent trustees.

However, in reality it appears that not all firms have been doing this. And, as there was no formal regulation in place, no one has been checking if companies are following the law.

New regulator

Finally, the Government has woken up to the issues in this sector and has announced that it will become regulated in the summer, under the wing of the Financial Conduct Authority.

Firms that want to continue to sell and operate funeral plans will need to apply to it for approval, which will mean satisfying a set of stiff criteria.

This is why we have seen some going bust in recent weeks, as the realisation kicks in that they will not pass the new grade.

My provider has gone bust

If you’re one of the 46,000 customers of Safe Hands – or another company that has gone bust – sit tight for a minute, as it is hoped that another provider will take over the plans and make sure they are delivered.

Should I cancel my plan?

If you took it out less than 30 days ago my advice would be yes, as you will be able to exercise your cooling-off right.

If not, you will need to check the cancellation provisions in the terms and conditions, as there is likely to be a termination fee.

Should I join a plan?

My advice would be to wait, if possible, until the summer and to then join one of the firms that has been approved by the FCA.