Government to crackdown on ‘shameful’ funeral plan sales tactics
With prepaid plans, customers pay a provider who then arranges or pays for a funeral when they die. Providers either invest the payments or take out a insurance against the life of the customer.
Demand for prepaid plans has grown by nearly 200 per cent between 2006 and 2018, according to the Treasury.
Last year, 177,000 plans were sold and cost on average between £2,500 and £5,000.
However, a recent call for evidence showed widespread concerns around the conduct of funeral plan providers, with some using high pressure and misleading sales tactics to get customers to sign up for plans.
Under the new plans announced by City minister John Glen, the sector will now be regulated by the Financial Conduct Authority (FCA). Any firm found breaching regulations could have their authorisation revoked, face fines, and even criminal charges.
The majority of the funeral plan sector is currently regulated by the Funeral Planning Authority (FPA) but on a voluntary basis and firms can choose not to sign up to the rules.
John Glen, said: “Planning for your funeral can be a difficult experience, but one that many of us will need to go through at some point in our lives.
“It’s shameful that there are those out there who look to prey on people when they are in this often emotional and vulnerable state.
“That’s why I’ve taken the decision to regulate pre-paid funeral plans, so people can have more confidence in the products they’re being offered and peace of mind that their affairs will be handled correctly.”
Soaring funeral costs
Funeral prices have increased by an average of 6 per cent a year for the last 14 years – twice the rate of inflation.
A funeral plan allows consumers to secure their funeral in advance and protect against future price increases.
Louise Eaton-Terry, funeral expert at Royal London, said: “The services covered by funeral plans vary among providers which isn’t always clear.
“Many consumers are unaware that their plan might not cover the full cost of the funeral, which can result in grieving loved ones being left with unexpected extra charges.
“The Treasury’s proposal to regulate pre-paid funeral plans is welcome news and will offer consumers greater protection.”
The FPA said it was “extremely disappointed” by the proposals.
A spokesperson said: “The outcome of this decision means increased costs for customers, as the greater cost of regulation will drive out smaller providers from the market. Customers will also be put at risk by reduced oversight of funeral plan providers, and a lengthy transition period where bad practice could happen among plan providers, without fear of reprisal.”