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The HM Treasury has recently published a consultation paper about the future regulation of the prepaid funeral plan sector. The government is proposing greater protection for consumers by introducing compulsory regulation.

The consultation paper proposes that the Financial Conduct Authority (FCA) will become responsible for the regulation of the sale and administration of prepaid funeral plans.

What is a prepaid funeral plan?

A prepaid funeral plan is an arrangement where a consumer makes one or more payments to a funeral plan provider. The funeral plan provider will then be responsible for paying and arranging for the funeral upon the death of the customer.  

A prepaid funeral plan typically cost between £3,000 to £4,000. The idea of a prepaid funeral plan is to pay in advance so that you have enough to cover some of your funeral expenses.

What regulations are currently in place for prepaid funeral plans?

The Funeral Planning Authority (FPA) is an organisation set up by the industry to regulate prepaid funeral plan providers in order to more transparency and protection for consumers.

The objective of the FPA is to ensure that prepaid funeral plan providers deliver an appropriate funeral service to their customers at their time of need. The FPA requires its members to abide by a set of rules and a Code of Practice that includes standards on:

  • Conduct
  • Marketing and advertising
  • Information (details of any funeral plan) 
  • Contracts and documents
  • Security of plan funds
  • Complaints and disputes

The government recognises the important role the FPA has played as the voluntary regulator of the sector to date. But in view of substantial growth in the market, the government has concluded that compulsory regulation is necessary.

Why was the consultation undertaken?

Although regulation already assists, it operates on a purely voluntary basis and firms can choose not to sign up to the rules. Plus, the regulatory framework overseeing the sale of purchase plans was developed in 2001 and remains the same.  

The demand for prepaid funeral plans has increased significantly in recent years, with the FPA suggesting a 200% increase in sales between 2016 and 2018. Due to the growth in this sector, the government wanted to ensure that consumers were sufficiently protected and to determine whether compulsory regulation was required.  

What was the objective of the consultation?

The government wanted to further understand:

  • How the prepaid funeral market currently operates.
  • The potential risks for consumers under the current regulatory framework.
  • Whether compulsory regulation of the sector is required by the Financial Conduct Authority (FCA).

What is the outcome of the consultation?

The government concluded that all funeral plan providers should work within the remit of the FCA. By introducing compulsory regulation within the funeral planning sector, this should ensure:

  • All prepaid funeral plans are subject to robust and enforceable conduct standards.
  • There is enhanced oversight of providers’ prudential soundness.
  • Consumers have access to appropriate dispute resolution if things go wrong.

By bringing funeral plan providers within the remit of the FCA, this would be the most effective way of regulating the sale of prepaid funeral plans.

How will the government's proposal benefit the consumer?

By introducing compulsory regulation within the prepaid funeral plan sector, and bringing all funeral plan providers within the remit of the FCA will help provide further protection to the consumer. 

It will be easier for consumers to identify credible suppliers and all suppliers will be expected to operate at a certain standard. Overall, regulation will improve the quality of the sales experience for customers and offer greater consumer protection.

What happens now?

The government has published its consultation paper and have invited the industry to provide feedback on their proposals. Responses will be taken into consideration before any future policy is finalised.

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