Funeral plans now protected by FSCS as the Financial Conduct Authority begins regulating the industry

Plan holders with 26 authorised funeral plan providers – representing approximately 87% of existing customer plans – will now have access to protection from the Financial Services Compensation Scheme (FSCS) after the Financial Conduct Authority (FCA) began regulating the sector on Friday 29 July 2022.

This means that if an FCA-authorised funeral plan provider goes out of business on or after 29 July 2022, FSCS may be able to protect eligible customers. This includes funeral plans bought before the FCA regulation date.

Where possible, FSCS will protect plan holders of failed funeral plan providers by giving them the option of either receiving a replacement funeral plan or compensation.

A replacement funeral plan would see FSCS arrange like-for-like cover with the same terms as the original plan (or as similar as possible). If a customer decides they would prefer to receive compensation, FSCS will calculate the amount they are due by reference to what it would cost to buy the same plan on today’s market.

Customers may also be able to claim compensation for certain regulated activities carried out by an authorised funeral plan provider or one of its appointed representatives (such as a will writer or funeral director). Examples include advice to take out a plan or how a funeral plan contract is carried out. The activity must have occurred on or after 29 July 2022.

If a funeral plan holder were to pass away and their funeral plan provider fails, but before FSCS has secured a replacement funeral plan or paid compensation (and the Insolvency Practitioner of the provider is not able to secure provision of a funeral), FSCS may be able to help with the provision of a funeral.

Funeral plan providers that become authorised part way through a financial year will not be liable to pay a levy in the same year. This means that funeral plan providers will not be required to meet any compensation or specific costs – including contributions to the retail pool – that arise during the 2022/23 financial year. FSCS does not expect a failure in 2022/23 and will provide an update on funeral plan levy fees for 2023/24 in due course.

Sarah Marin, Chief Customer Officer at FSCS, said: “The regulation of funeral plans means that we will be able to provide a trusted compensation service that helps build customer confidence in the industry. Especially now, with pressures regarding the cost of living and economic volatility, it is vital that we can assure customers of authorised firms – and their loved ones – that their funeral plans are safe and protected.

“Funeral plans enable customers and families to feel reassured and support them in what is an exceptionally difficult period. FSCS welcomes the regulation and we are pleased to be able to protect more customers.”

FSCS has recently published a new webpage of free resources for the funeral plans industry, including a downloadable industry toolkit and customer leaflets explaining its protection.

Further information for consumers, which includes how FSCS may be able to protect them should their funeral plan provider go out of business, is available on the FSCS website.

Information on what may happen to the customers of those funeral plan providers who have not been authorised can be found here.

Media enquiries

Conor Richards | e: conor.richards@fscs.org.uk m: 07415833890

Notes for editors

About FSCS

FSCS is the UK's financial compensation scheme that protects customers of authorised financial services firms if they fail or have stopped trading. FSCS currently protects:

  • Deposits held in banks, building societies and credit unions
  • Investments
  • Pensions
  • PPI
  • Debt management
  • Endowments
  • Mortgage advice
  • Insurance
  • Funeral Plans (as of 29 July 2022).

FSCS is independent and can pay compensation if an authorised firm fails and is unable to pay back money it owes its customers. FSCS’s service is completely free to use and is funded by the financial services industry. Customers keep 100% of any compensation owed when claiming directly through FSCS.

About the FCA and its regulation of funeral plans

The FCA is the conduct regulator for around 51,000 financial services firms and financial markets in the UK. The FCA aim to make markets work well for individuals, for businesses and for the economy as a whole.

This is done by:

  • Regulating the conduct of around 51,000 businesses
  • Prudentially supervising 49,000 firms
  • Setting specific standards for around 18,000 firms

The FCA was established on 1 April 2013, taking over responsibility for conduct and relevant prudential regulation from the Financial Services Authority (FSA).

More details about the FCA’s regulation of the funeral plan sector can be seen here. The press release from 29 June 2022, outlining that 87% of existing customer plans will be covered by authorised providers, can be seen here.

About Funeral Plans

Pre-paid funeral plans are products that allow you to pre-arrange and pre-pay for your funeral with a provider, generally for a fixed cost. They can be sold by a third-party intermediary (e.g. funeral directors and will writers), or directly by a funeral plan provider.