How greedy funerals firm skimmed cash from customer fund – and enriched bosses
MAIL ON SUNDAY today raises serious concerns about the way funeral company Safe Hands dealt with customers’ money before it collapsed.
Our investigation into the Yorkshire-based firm – which had 47,000 customers when it went under six weeks ago – found bosses were skimming off cash from the trust fund that was meant to pay for funerals. We can reveal that the trust fund had plunged £3.7million into the red – even though the money was supposed to be ringfenced and protected.
Company accounts scrutinised by the MoS show money from this vital trust fund was routinely being paid into Safe Hands’ general company coffers. The company was then paying large sums of money to its shareholders. In one year, £2 million of ‘surplus’ cash was paid from the trust fund to the company. That same year, £2 million was also paid in dividends from the company coffers to its shareholders. Records at Companies House confirm that the majority shareholder prior to the company’s acquisition by SHP Capital Holdings in early 2020 was Malcolm Milson.
An independent actuarial report, prepared by Zenith Actuarial and obtained by the MoS, also raises concerns over the investment management of the £60million trust fund. It queries a shortfall in the payments made into the fund (from cash given to Safe Hands by planholders) and the amount actuaries ‘would have expected’.
Having insufficient money set aside to pay for funerals that Safe Hands had promised to customers ultimately pushed the company to the point of collapse.
Tens of thousands of people had given Safe Hands more than £3,000 each, after being told it would save their families the hassle of paying for a funeral when they died. But customers have now been sent letters warning they are unlikely to get the funerals they paid for. Hundreds of victims have contacted this newspaper following our reporting of the emerging scandal over the past six weeks.
As we report opposite, many are elderly – the average age of planholders is 70 – and feel betrayed.
A big selling point of the plans was that customers’ money was protected in a secure ring-fenced trust fund, overseen by independent trustees and managed by a reputable investment manager.
Lucy Allan, Conservative MP for Telford in Shropshire, has a business background. She contacted The Mail on Sunday last week, following our reports. Like the MoS, she has examined the accounts of Safe Hands, based in Wakefield, West Yorkshire, and does not like what she has seen.
She said: ‘If Safe Hands’
planholders’ entitlements are not honoured it would undermine the trust and confidence in the whole funeral plans industry.’
Allan added that pressure needs to be brought to bear on industry leaders to find a solution ‘that protects planholders and the integrity of the sector’. Major players include the Co-op, Dignity and Prosperous.
So far, the Government has refused to intervene. It points to imminent regulation of the industry by the Financial Conduct Authority as evidence of its determination to create a sector fit for purpose.
John Glen, Economic Secretary to the Treasury, has said that bringing the industry into regulation will expose ‘unsustainable business models’ and prevent any
problems ‘from getTHE
Safe Hands funeral clients may lose all their money RAISING THE ALARM:
The Mail on Sunday’s report from March 27 this year
ting worse and impacting more consumers’. Allan said she would be raising the Safe Hands scandal in Parliament as soon as the Easter recess ends in nine days’ time.
WHAT OUR PROBE HAS UNCOVERED
LIKE a majority of funeral plan providers, Safe Hands put most customers’ payments into a trust fund – the Safe Hands Plans Trust.
Deductions were made for commissions paid to third-party sellers. As customers confirm above, the trust fund was a big selling point as it gave them reassurance that their money would be safeguarded. Plan literature promoted this point.
It informed customers the trust would be ring-fenced (separate from the main Safe Hands business), controlled by independent trustees, and the money invested by professional fund managers.
It said: ‘As one of the UK’s premier
funeral plan providers, it is of paramount importance to us ... that our customers’ investments are safe and secure.’
But accounts for Safe Hands Plans, filed at Companies House, suggest the trust was used to provide dividends to company directors, depleting the assets available to pay for planholders’ funerals.
The accounts do state the firm had the ‘right’ to these surpluses – while having an obligation to make good any fund deficit if it arose. So,
for the year to the end of May 2018, the accounts confirm that £2million of trust fund surplus – the difference between assets and liabilities – was used to boost the firm’s income. The same amount was then paid in dividends to shareholders.
In the previous year, the firm’s income benefited from the transfer of just short of £1.17million from the trust fund with company dividends paid of £1.13million. The accounts also show that director
Malcolm Milson, appointed at the end of July 2017, received consultancy fees of £110,400 as well as having an interest-free loan from the company of just short of £3.5 million. Also, a debt for £114,444 due from businesses controlled by ‘the director’ (Milson was one of two for most of the year) was written off because the amounts ‘were not recoverable’.
Although the accounts for the next two years do not disclose equivalent information, they do
confirm that trust surpluses were skimmed off in 2019 (£200,000) and 2020 (just under £2.4million). Milson left the company in February 2020 when it was taken over by SHP Capital Holdings.
ACTUARIES DISCOVER A £3.7M SHORTFALL
AT THE end of January this year, actuary Zenith Actuarial produced an independent report on the Safe
Hands Plans Trust. The report does not pull punches. It raises numerous concerns, notably a fund shortfall or deficit of £3.7million.
In other words, the assets of £60.7 million are insufficient to cover the future cost of funerals promised (£64.4million).
It also points out a shortfall in the expected contributions into the fund – and is alarmed about how the fund’s assets are invested by the fund manager. These are investments initially made by an adviser before being taken over by the fund manager. It says: ‘We remain very concerned about the investment funds and the potential lack of liquidity, specialist focus, high charges and potential issues relating to divesting.’
The fact that the investment funds are mostly based in the Cayman Islands is noted by Zenith.
ACTION SINCE THE DEFICIT WAS REVEALED
THE fact that Safe Hands’ trust fund was in deficit would have been enough for the Financial Conduct Authority to tell the company it would refuse its application to be authorised from the end of July – thereby giving Safe Hands the opportunity to withdraw from the process.
This is what happened in midFebruary with the FCA confirming the company had withdrawn its application. It then issued a stark warning: ‘Do not buy a new funeral plan from this firm.’
Late last month, Safe Hands collapsed, leading to the appointment of administrators FRP Advisory. In a note to planholders, FRP alarmed customers by saying the legal structure of some of the trust fund’s assets was ‘complicated’ and it was unsure which could be realised for the benefit of planholders.
WHAT THOSE IN CHARGE HAVE TOLD US
LAST week, The Mail on Sunday tried to contact Richard Philip Wells, a director of SHP Capital Holdings, by email and phone for an explanation of the poor health of the trust fund. He did not respond.
The administrator FRP declined to comment, although it is carrying out a detailed investigation into the failure of Safe Hands Plans.
Senior people at Safe Hands have been asked by FRP to attend interviews regarding the company’s collapse. Failure to attend will lead to them being required to go to court and be questioned under oath.
Sterling Trust Corporation, which looked after the trust fund, said it was ‘working closely’ with the administrators to find a solution that helps funeral planholders.
The FCA said: ‘People who bought a pre-paid funeral plan with Safe Hands will be understandably concerned. The Government changed the law to bring pre-paid funeral plans under our regulation from the end of July. Until then, these firms are unregulated and we have limited powers.’