Pre-paid funeral plans are set to be met with much stricter regulation, it has emerged. The funeral plan industry has been brought to the attention of the UK Government which plans to deal with bad practice in the sector.
Specifically, issues have been raised over high administration costs charged by introducers and the horror stories of bereaved families being left with high funeral bills, despite funeral plans previously being purchased.
It is understood that the Government is to launch a consultation on the regulation of the funeral sector. Statistics have shown that around 1.3 million across the UK have taken out a pre-paid funeral plan up to date.
Prepaid funeral plans are an anti-poverty measure to offset the high cost of funerals, which currently average around £4,000 in the UK and are expected to double in the next 10 years.
Upon purchasing a plan, the cost of the funeral is frozen and money is put into a trust and released to a funeral director upon death.
Who regulates the funeral sector?
It seems that the schemes are not regulated by the Financial Conduct Authority (FCA) and several providers are not yet registered with the current regular of the funeral sector which is called the Funeral Planning Authority (FPA). This, as of present, has limited powers of a maximum £5,000 or expulsion from the regulator.
A few companies have been accused by various campaigners of actively misleading advertising and of aggressive cold-calling and telesales. Furthermore, they have also been in trouble for offering very little customer protection for their investment if the firm were to ever fold. This calls for further and more through regulating of the industry to combat this sort of treatment of customers.
In some cases, brokers have been found to be charging administration fees or commission of as much as £1,000, money which was not well communicated and customers believed was going towards their funeral.
Dignity is one of the biggest funeral providers which said that it has long been trying to get stricter rules implemented for the sector. The firm did some research which found that 75 per cent of people who had taken out funeral plans actually though that the FCA was responsible for the regulation of the sector.
Dignity’s head of insight, Simon Cox, said that persistent cold calling was rife from a fair few companies.
He went on to say that “There are a growing number of new providers taking advantage of a regulation gap and are not regulated at all. There are a number of options open to the government and we will be recommending that the FPA is put on a statutory footing to compel all organisations selling funeral plans to be regulated.
“However, what is most important is that the regulation gap in the sector is filled. If this option is not possible, then a body with statutory powers such as the FCA is infinitely better than the status quo.”
“Another fast growing industry is equity release – this is where households over 55 are able to release equity from their home, receiving a large sum upfront, tax free and can continue living in their homes, whilst giving up a stake in their property.
“The market has increased from £1 billion to £4 billion lent out in the last 3 years and has served over 80,000 customers in the last year. The industry is currently regulated by the FCA and is not under any investigation.”
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