Consumer Protection

Last updated: 2nd February 2022

There has been some publicity about what protection is available for consumers who have a funeral plan. In August 2017 the Financial Services Compensation Scheme (FSCS) confirmed that funeral plans “ would not be covered by the FSCS because these products are not categorised as a ‘designated investment’ under FSCS’s compensation rules” .

FSCS protects consumers when financial services firms fail [or go bust]. It’s the compensation scheme for customers of UK authorised financial services firms. They cover business conducted by firms authorised by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

When a customer purchases a funeral plan they are protected; just not, necessarily, by the FSCS.  There are a number or mechanisms in place that protect customers who purchase a funeral plan.

It is worth noting that the rule of law in the UK is renowned throughout the world – funeral plan companies must abide by an extensive amount of legislation (i.e. laws) to operate and provide funeral plans to customers. If a company did not abide to legislative requirements it would be in breach of legislation and those involved may be prosecuted, and if found guilty they could go to jail.

The board of directors and trustees involved in funeral plan companies are considered to be highly experienced law-abiding citizens who conduct their affairs and that of the companies they operate or are involved in, in a legal and complaint manner and themselves are subject to audits to ensure their suitability.

When an individual takes out a Funeral Plan their money is either held in trust or whole of life policy. For further information please Click Here. Funeral Plan providers have a legal requirement to ensure compliance with the ‘Regulated Activities Order’ of the Financial Services and Markets Act 2000.

All of the funeral plan providers compared on the Funeral Plan Market website comply diligently with the legislation. If one of these funeral plan providers did go out of business this would NOT affect the customer’s funeral plan because their money would be in trust or a whole of life policy which by law are independent of the funeral plan company.

The below lists how a customer is protected when they purchase a funeral plan and recommended practises to consider when choosing a funeral plan:

  1. 1) English Trust Law

    There are a number of statutes designed to protect beneficiaries, or regulate the trust relationship, including the Trustee Act 1925Trustee Investments Act 1961Recognition of Trusts Act 1987Financial Services and Markets Act 2000Trustee Act 2000. Please note that this list is not exhaustive.

  2. 2) Section 75 of the Consumer Credit Act

    According to Money Advice Service:

    “The Financial Conduct Authority (FCA) doesn’t regulate funeral plans covered by insurance or trust arrangements.

    It does however stipulate rules for each method of investment, so sums paid by the customer are safeguarded and available to pay for the funeral when needed.

    If you’re paying for your funeral bill upfront, you could consider paying for part of on your credit card.

    When you pay with your credit card, you benefit from Section 75 of the Consumer Credit Act.

    This means you can get extra protection if things go wrong with the funeral director.

    You could also get this protection if you were to pay at least £100 of the funeral bill upfront, and then pay off the rest of the balance in monthly instalments.”

    The Money Advice Service was set up as an independent body with responsibility for improving people’s money management in April 2010. They were initially known as the Consumer Financial Education Body, the name used in the Financial Services Act 2010 which sets out their statutory objectives. The Money Advice Service is funded by the Financial Conduct Authority (FCA) who appoints the board of the Money Advice Service.

  3. 3) Visa, MasterCard and Amex Chargeback Scheme

    Whereas Section 75 of the Consumer Credit Act only covers credit card purchases over £100 the chargeback scheme covers debit card transactions as well. The chargeback scheme provides customer protection for good and services purchased that were faulty or not delivered (and includes cover for when a business has gone out of business/gone bust)

    In the case of funeral plans paid monthly only the deposit or 1 monthly payment would have need to be made by Visa, MasterCard or Amex [credit or debit card] for the full price of the funeral plan to be covered (for MasterCard only a minimum spend is required of £10).

    Although it is extremely unlikely this mechanism would ever be used for a funeral plan because the money is held securely in trust or whole of life policy it is nice to know this protection exists.

  4. 4) Industry Regulation

    Although funeral plan companies do not need to be authorised by the FCA the Funeral Planning Authority (FPA) does exist to protect customers.

    For a funeral plan provider to be a registered provider of the FPA the provider must comply with the Rules and Code of Practise requirements, which are extensive and go beyond statutory requirements.

    To view the rules visit: http://funeralplanningauthority.co.uk/regulations/rules/

    To view the code of practise view: http://funeralplanningauthority.co.uk/regulations/code-of-practice

    The FPA has an independent Board and Compliance Committee.  Every year all registered providers go through a rigorous due diligence and re-registration process with the FPA which includes a full valuation of the companies trust fund (assets against liabilities).  Any company which fails to meet the strict standards required by the FPA will have their registration revoked.

    FPA membership by a funeral plan provider is detailed on the results page when you compare plans. To compare funeral plans please Click Here.

    For further information on funeral plan providers please Click Here.

  5. 5) Trust Funds

    When a customer purchases a funeral plan using a supplier set up through Funeral Plan Market the money is held in trust or whole of life policy. Even if a funeral plan company did go out of business, the funds in the Trust are ring-fenced and cannot be accessed by the company as the money is protected by the independent trustees.

    It is a legal requirement for the trust to be run by independent Trustees who are responsible for accounting for all monies into and out of the Trust, they are responsible for ensuring the money from the Trust is used for the funerals of the plan holders.  Should a FPA registered funeral plan provider go bust (which has never happened) the trustees would work with the FPA to ensure the funeral plan commitments were fulfilled.

    For further information on trust funds used by each of the funeral plan providers please Click Here.