The government has published the ‘Regulation of pre-paid funeral plans: response to consultation’, outlining its intentions to bring funeral plans within the regulatory framework of the Financial Conduct Authority (FCA).

The consultation ‘Regulation of pre-paid funeral plans: Consultation on a policy proposal’ launched in 2019, confirms that in future:

  • All funeral plan providers will fall within the remit of the FCA.
  • All consumers of funeral plans will have access to the Financial Ombudsman Service.

The consultation sought views on:

  • How the pre-paid funeral plan market currently operates, particularly with respect to the types of business models in the sector both with respect to provision and distribution.
  • The potential risk of consumer detriment under the current regulatory framework, and if present, where this risk is most acute.
  • HM Treasury’s initial policy proposal to amend current legislation to allow for additional regulation of the sector by the Financial Conduct Authority (FCA).

The Funeral Planning Authority advised the government on the following:

  • A 200% increase in sales between 2016 and 2018.
  • Funeral plans are commonly backed by either assets held in trust, or by a whole of life insurance policy.

The government has had a growing concern about the risk of consumer detriment in the pre-paid funeral plan market and lack of regulation. Examples of issues consumers have faced include the disappointment in having to choose between either having to make additional payments towards the cost of a funeral or having to find another (cheaper) service option. Other examples included high cancellation and reallocation costs, as well as high charges issued to consumers if payment-on-instalment plans are missed.

The published response confirms:

  • All funeral plan providers will fall within the remit of the FCA.
  • All consumers of funeral plans will have access to the Financial Ombudsman Service.

The government is aware that the new regulations will increase burdens on the FCA, funeral plan providers and intermediaries. As such, there will be an 18-month implementation period from the point the legislation is amended, allowing time to review the design, of the new regime.

Any funeral plan providers looking to carry on the business of administering and/or selling plan contracts will need to apply to the FCA for authorisation. Due diligence will be needed when businesses are considering taking on contracts of another provider.

Links

UK Trusts
Trusts can be used in various forms for tax planning purposes. 

IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and Inheritance Tax. 

External links

Pre-paid funeral plans: Call for evidence

Regulation of pre-paid funeral plans: Consultation on a policy proposal

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