Thistle Logo

Generic filters

FCA consults on guidance for the funeral plans sector – Update

November 22, 2021

What has happened?

The FCA consulted on its draft rules and guidance for the funeral plans sector and proposed standards in its March 2021 consultation paper, CP 21/4, that firms will need to meet when the sector moves into FCA regulation. From 29 July 2022, activities involving the provision and distribution of pre-paid funeral plans will come under FCA regulation and firms conducting these activities will need to be authorised.

What do you need to do?

The proposed rules are intended to protect consumers that have a pre-paid funeral plan product, since the FCA wants to see an improvement in outcomes for consumers in this sector, with better value products, better sales practices, and better controls in place. All firms wishing to carry on this business after July 2022 will need to meet the same standards.

The FCA’s proposals are intended to ensure that:

    • products meet the individual needs of consumers – there will be a ban on the sale of products that do not provide for funeral services in almost all circumstances on the individual’s death,
    • plans are sold fairly, including a ban on cold calling to prevent consumers from being pushed into taking out plans which may not be right for them,
    • plans are fairly valued, with firms stopped from using additional fees to drive profits and a ban placed on commission payments to intermediaries, and
    • consumers have access to the Financial Services Compensation Scheme and Financial Ombudsman Service from day one.

This consultation was intended to be of interest to firms that sell or carry out funeral plan contracts for funerals in the UK, investment advisers that provide advice on funeral plan contracts, insurance firms that provide life insurance policies that back some funeral plans, and trustees of trusts and discretionary investment managers which manage the assets of trusts that back some funeral plans.

All firms in this sector need to consider how FCA regulation may impact their business and to make the necessary preparations. Over the coming months, the FCA will be providing a range of help and guidance to assist firms in preparing applications and getting ready to be regulated by the FCA. They will need to:

    • apply directly to the FCA for authorisation from September 2021 or, if appropriate, submit notification to become an Appointed Representative,
    • ensure they meet the standards to be authorised and, once authorised, follow the FCA’s rules, and
    • pay an application fee and then annual fees, based on turnover

Those funeral plan providers that cannot meet the FCA’s standards and those which are not authorised before July 2022 are expected to cease trading in relation to funeral plans in an orderly way. This should take place before FCA regulation takes effect, as carrying on regulated business without authorisation after rules take effect is a criminal offence. The FCA anticipates that the Funeral Planning Authority will continue to regulate providers of prepaid funeral plans registered with it until FCA regulation begins in July 2022.

The consultation has now closed. The FCA published feedback on the responses and issued Policy Statement PS 21/8, with near-final rules, after reviewing the comments received.

The Treasury is bringing about legislative changes for funeral plans to ensure that the Financial Services Compensation Service will be effective for consumers when it covers funeral plans. The FCA consulted on this in July 2021 via CP 21/20 and issued near-final rules, via its Policy Statement 21/15, in November 2021. FSCS coverage was confirmed in November 2021, subject to the Treasury legislation, and the FCA intends to finalise the rules and for them to come into force on 29 July 2022.

How can we help you?

If you’d like to know more about how we can help you with your funeral plan sales or advice arrangements, or any other regulatory compliance issues, our expert team is here to help.

Contact us today on 0207 436 0630 – or email