Ban on prepaid funeral plan cold-calling
The regulator will regulate the prepaid funeral sector from July 2022 and has launched a consultation to decide exactly how this will work.
The consultation, which closes on 13 April 2021, lays out draft rules showing how the FCA will improve standards in the sector.
In January, the Treasury made legislation bringing the sale and administration of funeral plans within the FCA’s remit, following concerns raised in the media and by consumer groups about the conduct of some prepaid funeral plan providers.
The FCA’s proposals intend to ensure that products meet the individual needs of consumers.
There will be a ban on cold-calling to prevent consumers being pushed into taking out plans which may not be right for them.
The regulator will also ensure prepaid funerals are priced fairly to stop firms from using additional fees to drive profits. There will also be a ban on commission payments to intermediaries.
The proposed rules will also ensure that consumers have access to the Financial Services Compensation Scheme and Financial Ombudsman Service should things go wrong.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Pre-paid funeral plans can help people and their families to manage the costs of a funeral. It is vital that consumers have confidence that their plan will deliver the funeral they expect at a fair value.”
Funeral plan providers that can’t meet the FCA’s standards will be forced to stop selling prepaid funerals.
Knowing your family won’t pay the enormous cost of a funeral after you’ve gone can bring enormous peace of mind. Unfortunately, opportunists have used this to their advantage.
According to Citizens Advice Scotland and Fairer Finance, some prepaid funeral providers have been harassing and misleading vulnerable people, and selling overpriced plans that actually don’t guarantee to cover the cost of a funeral.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The FCA has been looking into the market since 2018, and has announced that from July 2022 it will regulate it. It will ensure products will usually cover funeral services, that they have to be sold fairly, and that they can’t be inflated with additional fees or third-party commission.
“However, this doesn’t necessarily make these plans right for you. There are plenty of ways to cover the costs of a funeral. It’s well worth considering setting aside money in a savings account for funeral costs. Alternatively, you can explain to your family that it will be covered by other plans you have in place, such as life insurance written in trust or workplace death in service cover.
“If you already have cover, check whether your provider is applying for authorisation. If they don’t, they may sell your policy onto another provider, or they may wind up and refund your premiums. If your provider stops trading, there may be delays in the money being returned, and you will need to start planning for your funeral all over again. So it’s worth getting to grips with where you stand as soon as possible, so you have a chance to make alternative arrangements.”