Grave concerns about the selling of funeral plans

Funerals are big business. There’s no getting away from it, death is a fact of life.

We’ve all seen the adverts with well-meaning relatives setting aside money for their loved ones to go towards the cost of their funeral, or as cash gifts in the event of their passing.

Making plans for your funeral is a perfectly reasonable thing to do, particularly for those looking to ensure their family members have one less thing to worry about during the grieving process. A pre-paid funeral plan means meeting what can be a substantial bill is covered in advance or in instalments, and the customer is also protected from rising costs.

But what if your best-laid plans have been mis-sold to you?

Non-workplace pension schemes have, for years, had to be approved by the Funeral Planning Authority and organisations regulated by the FPA are expected to stick to their code of conduct.

Unfortunately, there are companies who haven’t signed up to the FPA, and are therefore unregulated. It’s an issue the industry has taken steps to rectify, and HM Treasury is proposing that companies looking to sell pre-paid funeral plans to customers must be overseen by a regulatory body, namely the Financial Conduct Authority (FCA).

The FCA is clamping down on companies who take their customers’ money without proper consideration of where it is being held or invested.

That comes into force from 29 July and is a direct result of the treasury and the FCA identifying activities of unregulated funeral plan providers.

Examples of such practices include:

Plans that do not meet the customer’s needs or expectations, and especially consumers who pay by instalments but that aren’t guaranteed a funeral service despite the assurances of their salesperson.
High-pressure tactics used by brokers or intermediaries in order to sell plans. These include the cold calling of potentially vulnerable consumers, and coercing them into signing up to plans unsuitable for their needs.
Consumers paying more than they should for the product’s benefits, primarily due to the high commissions and fees added to their payments, usually undisclosed to them.
Intermediaries recommending products based on the commission it earns them, which is potentially a situation where there is a conflict of interest.
Plans being unclaimed because their families aren’t aware they had any funeral provision, and are unable to activate plans when they are later discovered.
Poor financial management of trusts, leaving insufficient funds to cover funeral costs.

The FCA is now proposing new rules to protect customers. These include a ban on commissions for intermediaries and outlawing cold callers, to ensure the products they offer represent a fair price. Providers must also guarantee they will always deliver a funeral – something that does not currently apply – as those who don’t will not be able to sell plans. And those selling funeral plans will be subjected to fitness checks in order to maintain the standards customers are entitled to expect.

But, until FCA regulation for funeral plan providers is in place, hard-done-to consumers cannot lodge complaints to the Financial Ombudsman, and they won’t be protected by the Financial Services Compensation Scheme (FSCS) should their provider fail and go out of business.

The FSCS does have money set aside to compensate customers but they must have bought their funeral plan from a recognised and regulated business.

We are not advocating pre-paid funeral plans, nor are we advising people to steer well clear. We aren’t even recommending one provider over any other. Planning for a funeral in advance may be the best move for yourself and your family – it’s entirely a matter of personal choice.

And who knows what will happen to funeral prices in the future? The costs could escalate, as they tend to with any service where there is a degree of competition.

We would, however, suggest that anyone looking to make funeral provision by means of a pre-paid plan should follow these basic guidelines:

Do not buy your plan from a salesperson who claims they are protecting you against rising costs. Their predictions are, at best, guesswork and they may, if they’re hoping to earn a commission, be somewhat biased in their interpretation of what their crystal ball is telling them.
Avoid buying a funeral plan from someone who tells you to get the price fixed. Doing so restricts you as you are tied in to their price with administration and/or cancellation fees to be applied. Also, you may not have the option to make any changes you want or need to.
Never buy or pay for any funeral plan over the phone. Your seller may tell you they represent a reputable, long-standing business – and they could well do. But they should know that their products are to be explained to the customer in person and there should be no pressure to buy exerted on them.
Avoid purchasing from brokers, intermediaries or third party ‘introducers’. They are, more often than not, simply selling someone else’s funeral plan, for which they will earn commission. These costs are added to your plan costs, meaning you are not getting the best possible value for your money.
Only buy a funeral plan from someone who is directly employed by their firm, rather than purchasing from self-employed sellers offering funeral plans for businesses. Check that they are on the payroll of the provider they are promoting and ask to see their company ID badge or business card.
Never feel pressurised to rush into a decision in order to benefit from a ‘special offer’ or to get it arranged ahead of forthcoming price rises. Professional, well-respected consultants are happy to provide you with all the information you need, and afford you the time to make an informed decision.
Always tell a family member or close friend of your plan and your intentions.