OVER one million customers with pre-paid funeral plans have seen their rights boosted today after the financial regulator brought in new protections.
The new rules from the Financial Conduct Authority (FCA) mean customers on pre-paid funeral plans will now be able to get compensation if their provider goes bust.
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Funeral plan providers will be banned from cold calling, which should reduce the risk of mis-selling.
Meanwhile, consumers who are unhappy with their plan, will be able to go to the Financial Ombudsman Service (FOS) if they’re unhappy with how their provider has dealt with their problem.
On top of this, funeral providers will only be able to operate if they’re authorised by the FCA.
Some 26 providers have already been authorised, covering 1.6 million plans, or 87% of the market.
Some 13 firms that applied, but were not granted authorisation, have until October 31 to transfer their plans to authorised firms or refund their customers.
A pre-paid funeral plan allows either yourself or someone else to pay for the costs of a funeral in advance.
But a slew of providers have gone into administration in recent years, leaving thousands of customers out of pocket.
In April, funeral plan provider Safe Hands went into administration leaving thousands of people in limbo.
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The plans have become popular as the cost of burials and cremations has soared.
Many people take out a plan to avoid their loved ones having to pay out for an expensive funeral when they die.
Figures from life insurance company Sun Life revealed the average cost of a funeral hit nearly £9,000 last year.
A funeral plan lets you lock in a price ahead of time. So, if you buy a plan that costs £3,000 for a certain type of funeral – for example one that includes a burial, minister and car – even if the price of the same funeral has risen to £5,000 by the time you die, your family won’t be asked to pay any extra.
Some plans let you spread the cost over a number of months or years, and with others you’ll pay up front.
Crucially, if you take a plan out with an unauthorised firm, you won’t be covered if it goes bust.
Emily Shepperd, executive director of authorisations at the FCA, said: “With our new rules in place, consumers will be better protected, when they need it the most.”
Today’s new rules follow the FCA’s announcement of plans for a “consumer duty”, which will aim to end rip-off charges and fees and get companies to provide more efficient customer support.
What the new rules mean?
The new funeral plan rules mean customers of providers authorised by the FCA will have access to the Financial Services Compensation Scheme (FSCS).
This means your money is protected if your provider fails.
Consumers can make a complaint to the Financial Ombudsman Service (FOS) if they’re not happy with how a provider handled a complaint.
This applies if you made a complaint before the rules came into effect.
The FOS is free to use and settles complaints between consumers and businesses that provide financial services.
Under the new regulations, only providers authorised by the FCA will be able to offer pre-paid funeral plans.
James Andrews, senior editor at price comparison site Money.co.uk, said the new rules represented a “massive clean up” of the industry and were long over-due.
“Pre-paid funeral plans were a superb idea that some firms took advantage of by not ring-fencing customer’s money and failing to protect them in the event of collapse,” he said.
Are pre-paid funeral plans worth it?
James said that with the new rules in place, pre-paid plans are “definitely worth looking at”.
But, he warned: “The crucial advice for consumers is to check the FCA register and only buy from a provider that is authorised, otherwise you and your loved ones won’t have any comeback if something goes wrong.”
James added that because the 13 providers who have failed to apply for authorisation should wind down or sell their plans on to firms that have received authorisation, people with those providers should be in a “secure financial position”.
But, he said it is worth checking with your specific provider if they’re not on the FCA register and you haven’t been informed in writing from your new provider.
