COVID deaths puts spotlight on UK's pre-paid funeral sector as standards come under scrutiny

Lucy Harley-McKeown
·3 min read
Old woman laying flowers on a grave
Average funeral costs have soared so much over the past decade that competition regulators have launched a consultation. . Photo: Getty

The UK's Financial Conduct Authority (FCA) has launched a consultation into pre-paid funerals, hoping to improve standards in the sector.

In January, the Treasury made legislation bringing the sale and administration of funeral plans within the FCA’s remit, following concerns raised in the media and by consumer groups about the conduct and financial soundness of some pre-paid funeral plan providers.

The review comes following revelations that the COVID-19 pandemic has fuelled a surge in cremations carried out without funerals, as lockdown curbs, financial pressures and shifting attitudes change how Britain honours the dead.

Such direct cremations, as they are known by the funeral industry, were once widely seen as a form of “pauper’s funeral,” with no ceremony or mourners at the time of cremation.

The catastrophic legacy of COVID-19 means that more than one in three people it cremated in January was suffering from the illness when they died.

Many households’ incomes have taken a hit during the pandemic, while average funeral costs have soared so much over the past decade that competition regulators launched a consultation.

It lays out how the FCA will improve standards in the sector and proposals intend to ensure that:

  • Products meet the individual needs of consumers – the FCA said it will ban the sale of products which 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 being pushed into taking out plans which may not be right for them.

  • The price of plans are fairly valued, with firms stopped from using additional fees to drive profits and a ban on commission payments to intermediaries.

  • Consumers have access to the Financial Services Compensation Scheme and Financial Ombudsman Service from day one, should things go wrong.

READ MORE: Basic cremations soar as COVID-19 and David Bowie erode 'pauper's funeral' stigma

Sheldon Mills, executive director of consumers and competition at the FCA said: "Pre-paid funeral plans can help people and their families to manage the costs of a funeral. It is vital that consumers have confidence that their plan will deliver the funeral they expect at a fair value.

"The measures proposed today will help ensure that the industry serves consumers well."

All firms in this sector now need to consider how FCA regulation impacts their business and begin 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 for regulation.

They will need to apply directly to the FCA for authorisation from September 2021 or, if appropriate, submit notification to become an appointed representative.

The FCA recommends they apply as soon as possible after the application gateway opens in September 2021 – applications made after 1 November 2021 may incur a higher application fee.

Firms should also ensure they meet standards to be authorised and then pay an application fee and then annual fees, based on turnover.

The FCA anticipates that the Funeral Planning Authority will continue to regulate providers of prepaid funeral plans registered with them, until FCA regulation begins in July 2022.

The FCA is asking for feedback on the draft rules and is asking for responses by 13 April 2021.

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