"HM Treasury’s decision for the FCA to regulate pre-paid funeral plans is a positive step forward for funeral directors, financial intermediaries and customers"
The Treasury said regulating the plans would ensure the market is competitive and bring to an end the "high pressure and misleading tactics" in the sale of these plans.
The FCA is set to design a new, robust framework to ensure that providers are clear and fair in their treatment of customers. This will also offer people access to the Financial Ombudsman Service, enhancing consumer protection.
Although a regulator already exists, it operates on a purely voluntary basis and firms can choose not to sign up to the rules.
The move comes after a recent call for evidence showed widespread concerns around the conduct of funeral plan providers, with some employing high pressure and misleading sales tactics in order to get customers to sign up to plans.
Under these new plans, anyone found breaching the regulations can have their authorisation revoked, face fines and even criminal charges.
Demand for funeral plans has grown by nearly 200% between 2006 and 2018. Last year, 177,000 plans were sold and cost on average between £2,500 and £5,000.
City minister, 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."
Suzanne Grahame, chief executive at Golden Charter, commented: “HM Treasury’s decision for the FCA to regulate pre-paid funeral plans is a positive step forward for funeral directors, financial intermediaries and customers and we welcome it.
“This is an announcement we have been requesting and preparing for since the start of last year. Golden Charter has been leading the way in ensuring that our funeral plans can only be purchased through highly trained subject matter experts, with our approach to third party sellers requiring them to be FCA regulated or members of a recognised professional body. The strong relationships we have sought and developed with our adviser networks is testament to that approach.
“As a result, we have remained ahead of our competitors in our approach to sales quality, best advice and Treating Customers Fairly (TCF). For these reasons, we think we’re the best placed company to continue to provide pre-need options for customers in the new environment.
“While we still do not yet have the full information on how the new system will operate, the proposal published describes in some detail the close parallels to be drawn with other FCA regulated markets such as the insurance sector. To that extent this is largely a known model and one we have been planning for since 2017. A great deal of work has been undertaken in recent years to ensure we are in a strong position to respond to any new regulatory regime or requirements and this will now come to fruition.
“This announcement is an important step forward. Regulation will improve the quality of the sales experience for customers and offer greater protection. It will increase security for individuals while simultaneously enhancing the reputation of the industry and that can only be a good thing.”
