Our private client team warns that pre-paid funerals may be subject to greater financial scrutiny in the future.
For a number of years now organisations have offered pre-paid funeral plans. The idea being that paying for your funeral now will save money in the long term and take unnecessary stress away from family members at the time of your death.
Not surprising, the market is a large one and is growing rapidly. Sales of pre-pay plans in 2017 were more than three times higher than in 2006. According to Treasury figures, the 24 members of the Funeral Planning Authority (FPA), which comprise 95% of the market, have over 1.3 million undrawn plans, equivalent to GBP4 billion in assets under management. In 2017 these providers sold over 207,000 new plans.
Providers of pre-pay funerals are not regulated at all if they undertake to apply the customer’s payments to a whole life insurance policy and to hold the proceeds on trust for the funeral expenses. In fact, all pre-pay providers currently claim to be exempted from regulation on this basis. Members of the FPA also subscribe to its voluntary code of practice which allows it to terminate their membership or impose fines for non-compliance, though these powers have never been used.
The Treasury has launched a call for evidence to support its plans for a more robust regime. It has chosen the FCA as the regulator because pre-pay plans are similar to insurance policies, which already come under the FCA’s scope. The FCA’s Unauthorised Business Department (UBD) already investigates complaints about unauthorised funeral plan providers. 12 complaints were made in 2017. The Treasury is looking for responses by 1 August.
Dealing with a loved ones funeral is never easy and ensuring yours wishes are understood should also be considered. Our team emphasises the need for everyone to ensure they have a suitably drafted Will in place so that there isn’t extra pressures on family members. Failure to put a suitable Will in place may also result in a higher tax liability on death and in some cases family fallouts and/or disputes.