What Happens If Your Pre-Paid Funeral Plan Provider Goes Bust?

Pre-paid funeral plans are purchased by hundreds of thousands of people each year as a way of fixing the cost of their funeral and relieving their family of a financial burden. The collapse of several providers over the years — most notably Safe Hands Funerals in 2022 — exposed the risks of an unregulated market. The introduction of FCA regulation has significantly improved consumer protections, but there are still important questions to ask about any existing plan.

The FCA regulatory regime introduced July 2022

Before 29 July 2022, the pre-paid funeral plan market in the UK was not regulated by the Financial Conduct Authority. Providers operated under a voluntary self-regulatory framework, primarily through the Funeral Planning Authority (FPA). This left consumers significantly exposed if a provider failed.

Since 29 July 2022, all providers of pre-paid funeral plans must be FCA authorised. The FCA rules require that:

• Customer funds are held in a ring-fenced trust or used to fund a whole-of-life insurance policy — they cannot be used by the business for operating costs or other purposes
• The trust or insurance policy must be independently administered and audited
• Plans must not be mis-sold; providers must give clear information about what is and is not included
• The Financial Services Compensation Scheme (FSCS) can provide protection if an FCA-authorised firm fails, subject to the standard FSCS limits (currently £85,000 per person per firm for protected investment products)

Any provider who was not authorised by the FCA by 29 July 2022 was required to cease selling new plans. Existing plans held by unauthorised providers needed to be transferred to an authorised provider or wound down.

The Safe Hands Funerals collapse

Safe Hands Funerals entered administration in March 2022, just months before the FCA regulatory regime came into force. The company had been a member of the Funeral Planning Authority but its customer funds were not adequately ring-fenced, leaving approximately 46,000 customers with plans they had paid for and no guarantee of a funeral.

The outcome for Safe Hands customers was stark:

• Customers received approximately 10-19p in the pound of the money they had paid, returned through the administration process
• Many customers faced having to pay again for a funeral they believed was already arranged and paid for
• The administrators were unable to transfer plans to another provider because the funds were insufficient to cover the cost of funerals promised
• No compensation scheme covered Safe Hands customers because the plan was sold before FCA regulation, meaning the FSCS did not apply

The Safe Hands collapse was a significant driver of the introduction of FCA regulation. It demonstrated why self-regulation was insufficient and why ring-fencing of funds is essential.

The Funeral Planning Authority: what it covered and its limitations

The Funeral Planning Authority (FPA) was the principal self-regulatory body for the pre-paid funeral plan market before FCA regulation. It required members to ring-fence customer funds in a trust or insurance arrangement and maintained a code of practice.

However, the FPA had significant limitations:

• Membership was voluntary — not all providers were FPA members
• The FPA could not legally require members to hold funds in a particular way, only recommend it
• There was no compensation fund: if a member failed, the FPA could not compensate customers from its own resources
• The FPA ceased operations on 29 July 2022 when the FCA regime came into force, transferring its remaining functions to the FCA

Plans sold by FPA members are not automatically protected by any legacy scheme. If you have an older plan that was FPA-regulated, you need to check whether the provider is now FCA-authorised and whether your plan has been transferred to the new regime.

How to check whether your provider is FCA authorised

The most important thing you can do right now if you or a family member has a pre-paid funeral plan is to verify that the provider is FCA authorised. This takes a few minutes:

• Go to the FCA Register at register.fca.org.uk
• Search for the provider's name or, if you have it, the firm reference number from your plan documents
• Check that the firm is shown as 'authorised' and that its permissions include 'funeral plan contract provider'
• If the firm does not appear or shows as 'formerly authorised' or 'unauthorised', contact the FCA consumer helpline on 0800 111 6768 immediately

What to do if your provider cannot be contacted or is in administration

If you cannot contact your provider, if they have gone into administration, or if they are refusing to honour a plan, take the following steps in order:

• Check FCA register status: Establish whether the firm was FCA authorised and when
• Contact the Financial Services Compensation Scheme (FSCS):If the firm was FCA authorised at the time of failure, the FSCS may be able to compensate you — call 0800 678 1100 or visit fscs.org.uk
• Contact the administrators: If the firm is in administration, the appointed insolvency practitioners will be managing claims from creditors — you are an unsecured creditor if your funds were not properly ring-fenced
• Financial Ombudsman Service: If your plan was with an FCA-regulated firm and you have a complaint about how it was sold or administered, the Financial Ombudsman Service (financial-ombudsman.org.uk) can investigate — this is free for consumers
• Citizens Advice: For practical guidance on your specific situation, Citizens Advice can help you understand your options