Thousands hit by shake-up of pre-paid funeral plans sector

Elaine Canyon, a 66-year-old caregiver, was devastated to discover that the £ 7,000 she had spent for her and her husband Ian’s prepaid funerals was now at risk.

“I cried and cried when I found out – we worked and saved very hard to pay for our funeral plans so our son would not be burdened,” she said of her home in Buckington, Lancashire.

“There’s no way we can start over – my husband is being treated full time with multiple sclerosis and I’m still working as hard as I can… Trying to get by.”

The mall is among 46,000 older people left confused by Financial collapse Of Safe Hands, a leading funeral provider.

Experts warn that other companies are also at risk as the Financial Conduct Authority (FCA) prepares to implement regulatory crackdown on the sector from July.

Due to concerns about incorrect sales, cold calls and improper financing, the watchdog will require companies that sell and manage programs to get FCA approval.

The new system will replace the Self-Regulatory Funeral Planning Authority (FPA), a voluntary body with no authority to stop suppliers from trading.

The concern among activists, who have long called for statutory regulation, is that not all funeral providers will be approved and may fall to the administration.

James Daily, who campaigned on the issue with the Fairer Finance consumer support group, told FT Money: “A handful of companies were run fast and loose and some of them got their request I do not think they will be able to cross the line.”

He said the “main problem” was funding, with the FCA imposing stringent capital requirements on trusts, in which operators have to put money into the customer for prepaid plans. “These need to be funded 110% on the cost of their clients’ funerals, to cover inflation and other risks.”

He added: “Some companies will not be able to collect their financing claims. They may try to sell their books, but who will get a shortfall in unfunded trust? It will not be the big and well-known companies, but it may affect maybe 10,000 more customers – in addition to the hands customers. The safe. “

The FCA website showed this week that 42 companies have applied for FCA approval, six have not yet applied, 14 are planning to transfer their business to other suppliers, and one has completed a transfer. Three withdrew their requests. About 1.7 million people have prepaid funeral plans.

Daley said the regulation came after concerns about high-pressure sales tactics about what the products cover. “When the plan was completed, relatives were asked to pay lots of extra payments. Commission levels were remarkably high – up to £ 1,000 at a £ 4,000 funeral. There was no real oversight of whether the money was being handled.”

In 2001, the Supervised Activities Order – an update to the Financial Services and Markets Act that covered a range of financial products – stipulated that funeral providers would not have to be regulated as long as they follow a few rules. In particular, companies were forced to put client money in trust, with an independent fund manager and trustees. Daley said: “No one has checked that this is happening.”

The three major providers – Co-op, Dignity and Golden Charter – have all welcomed FCA regulation.

Gordon Swan, Golden Charter’s communications director, said: “It has been clear for some time that those on the fringes of funeral planning markets are finding alternative routes for prospects, with incentives offered to third parties quickly reaching unsustainable levels. Ethical and well-managed operators need not Rely solely on investment growth that will exceed costs, because they have well-funded trusts and transparent business models. “

Dignity said: “An effective funeral plan should freeze the cost of services included in the plan at today’s prices.”

The FCA’s new rules will ensure that plans – which typically cost £ 3,000 to £ 4,000 – are fair value and properly funded. Cold calls and commission payments to brokers will be banned.

In the meantime, those who want a plan are called to wait until July 29 – then customers will be able to get their money back if the vendor stops complaining to the Financial Ombudsman Service if they are not satisfied.

But it’s coming too late for Mall and other Safe Hands customers, who now have no guarantee they’ll get a refund.

“You don’t want all these worries at my age,” Kenyon says. “The purpose of these programs is to give peace of mind, but I can not stop thinking about it all the time. It’s just so awful.”

Widower Malcolm Hausley, 75, of Wolverhampton, has spent £ 1,550 on a “safe hands” program. The former RAF engineer, who fought a square heart bypass, said: “I used Safe Hands because I knew it was a member of the FPA, which made it look safe. I can not understand how all that money went away.”

Safe Hands’ latest accounts show net assets of just £ 5,088 a year until the end of May 2020 – although the trust funds are held separately, according to the FPA.

Safe Hands executives, FRP Advisory, said customer payments appeared to have been held in a complicated mix of stocks, bonds, cash, real estate and loans. They are examining whether it will be possible to realize these investments for the program owners.

FRP said Safe Hands, based in Wakefield, West Yorkshire, has run into financial difficulties for a number of reasons, including the plague. The executives’ proposals will be posted on the membership house website within eight weeks of the March 23 appointment, FRP added.

Graeme McAusland, CEO of the FPA, said: “Safe hands did indeed meet our criteria when they were first registered with us in 2019 and then re-registered. This assessment was based in part on “professional reports received from trust auditors and actuaries, along with information provided by the firm and trustees.”

The FPA will be disbanded when the FCA takes over market regulation.

Thousands hit by shake-up of pre-paid funeral plans sector Source link Thousands hit by shake-up of pre-paid funeral plans sector

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