TOM Barkes’s heart dropped as he opened a letter stating that his funeral plan provider had gone bust and he might have lost £6,570.
Tears rolled down the cheek of Margaret, his wife, as the couple digested the news – they had each taken out a funeral plan worth £3,285 with Not For Profit (NFP) Funeral Plans in 2019.
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Prepaid funeral plans mean you pay for the cost of a funeral in advance, to spare your loved ones having to fork out thousands after you die.
The plans can be cheaper too – the average funeral now costs a hefty £8,894, according to insurance group SunLife.
With costs soaring, it’s no wonder more people are taking out plans so their loved ones aren’t left struggling to settle a big bill at an already stressful time.
But a string of funeral plan provider failures has left many people’s plans hanging in the balance.
Earlier this month, Tom, 70, and Margaret, 71, were “distraught” when they got a letter informing them that NFP Funeral Plans had gone into liquidation.
The firm had 700 plan holders on its books at the time it went under.
The couple were horrified to read that their plan would not be transferred to another provider – meaning they could lose £6,570 in total.
“I was absolutely gutted, my wife is in tears,” Tom said. “We are both over 70 years of age and we can’t afford to lose this money.
“The paperwork we got through when the company went into liquidation is confusing – it’s all gobbledegook. We don’t understand it.
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“When we took the plans out, we were sure we were doing the right thing.
“But we would never have done it if we had known this would happen, we would have just put my money into an ISA instead.”
Tom and Margaret are not the only couple to face this situation.
The Financial Conduct Authority (FCA) has been so concerned about the funeral plan industry that it has now brought in new regulations to protect consumers.
Under the new rules, customers with pre-paid funeral plans will be able to get compensation if their provider goes bust, and firms will be banned from cold calling.
Firms will also only be able to sell the plans if they are authorised by the FCA to do so. It has shared a list of 26 firms which have passed its checks – but 13 others have been banned.
Tom and Debbie were told to try and request a chargeback through their bank, Lloyds, to get their money back.
Under a chargeback, your bank withdraws funds deposited into the company’s bank account and puts the cash back into yours – but you only have 120 days from purchase to make the claim.
Worried they would be left thousands of pounds out of pocket, the couple contacted The Sun’s Money team for help.
We asked Lloyds to investigate the couple’s case, and the couple have been awarded a full refund via chargeback.
A Lloyds Bank spokesperson said: “Mr Barkes got in touch about his issue with Not for Profit in mid-July and we have been taking the steps needed to review his case.
“We’ve now finished looking into things and have contacted Mr Barkes to arrange his payment.”
Kelly Semke, director of Quantuma, the firm appointed as administrator for NFP Funeral Plan, said: “We understand that the closure of NFP Funeral Plans may be worrying news for plan holders and their friends and family.
“However, I’d like to reassure them that we are working tirelessly to establish what solutions can be offered.
“We will be contacting plan holders individually with regard to next steps.”
What are your rights if your funeral plan provider goes bust?
New rules came into force last week to better protect pre-paid funeral plan customers.
From July 29, you’ll be protected by the Financial Services Compensation Scheme (FSCS) should your plan provider go bust.
It should mean that even if your provider goes bust, your funeral will be carried out as planned by another provider or you’ll get your money back.
On top of this, funeral providers will only be able to operate if they’re authorised by the FCA – be sure to check before taking out a plan.
Some 26 providers have already been authorised, covering 1.6 million plans, or 87% of the market.
But the legislation is not retrospective, which means if your funeral provider went bust before July 29, you are not protected by the new rules.
That could leave thousands more like Margaret and Tom out of pocket.
James Andrews, personal finance expert at Money.co.uk, said if you find yourself in this situation the only way to try and get your money back is to apply to the firm appointed as the administrator of the provider that has gone bust.
“The firm administrating the liquidation is responsible for distributing any assets the company has left to the creditors, so that’s the best place to start,” he said.
“There should be details on the company’s website of who to talk to.”
As well as applying for a chargeback, like Tom and Margaret did, you could also try claim your money back under Section 75 of the Consumer Credit Act if you used a credit card.
This applies for purchases for more than £100.
If your funeral plan provider goes bust from now, 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.
