By summer, unregulated funeral plans will be dead and buried

LAST WEEK I received a call on the LBC Consumer Hour from a lady concerned about the funeral plan she’s paying into, amid news of some providers going bust. That provoked a flurry of calls, texts and emails from other concerned listeners and all week it’s been the hot topic. The two main questions I’m being asked are: 1. Are funeral plans safe? 2. Should I carry on paying into my plan? Here’s what you need to know:

NO RULES TO PLAY BY

At present this is an unregulated sector with only a voluntary quasi regulator in situ, known as the Funeral Planning Authority (FPA). Firms do not need to be a member of the FPA and it has no statutory powers. The other major flaw is that there is currently no compensation scheme in place if a firm fails.

WHERE DOES MY MONEY GO?

With a funeral plan you pay in monthly for a future expense, just as you would with a Christmas savings club. If properly run, firms operating funeral plans should put your money (less their fee) into a trust overseen by independent trustees. However, in reality it appears not all firms have been doing this and as there was no formal regulation in place, no one has been checking if they were following the law.

CHANGE IS ON THE WAY

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

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

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

MY PROVIDER HAS GONE BUST

If you’re a customer of Safe Hands or another firm that has gone out of business, sit tight for a while as it is hoped that another provider will take over the plans and make sure they are delivered.

DO I CANCEL MY CURRENT PLAN?

If you took it out less than 30 days ago my advice would be yes, as you will be able to exercise your right to a cooling off period. If not, 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 until the summer and then join one of the FCA-approved firms.