Unlike the majority of the UK’s financial market which is regulated by the Financial Conduct Authority (FCA), Pre-paid Funeral Plans are regulated by the Funeral Planning Authority (FPA).
In September 2019 the FPA announced a set of rules and a new code of practice to take effect in 2020 – this is ahead of the government’s announcement to regulate the funeral planning market under the FCA, which will likely take a couple of years to implement.
What is the FPA?
And importantly, what does it do to protect consumers?
- The FPA is a self -regulatory body set up by the industry to provide a regulatory framework to govern funeral plans.
- Registration with the FPA is voluntary but providers registered with the FPA are estimated to represent approximately 95% of the funeral planning market.
- Registration with the FPA requires registered providers (RPs) to comply with a set of Rules and a Code of Practice, which aim to protect customers.
What is a pre-paid funeral plan?
An Annual Registration Process
Registered Providers are subject to an annual registration process carried out by an independent Compliance Committee.
At the very least this process considers:
The trust deed or insurance arrangements to ensure these meet the requirements of the FPA Rules. For example, to ensure there are independent trustees.
Accounts from the provider company and the trust reflecting appropriate accounting for the trust and the liabilities that may be incurred by the provider that lie outside the trust or the insurance policy as relevant. This includes considering actuarial valuations of the trust by a qualified actuary.
A statement of Investment Principles and an understanding of how these are implemented in practice for trust-based plans. Details of the insurance policy and the insurance company for insurance-based plans.
An understanding of the detailed economics of the business.
An understanding of the relationships with funeral directors and the degree to which commercial agreements are in place for them to carry out funerals. If such agreements are not in place across the book of plans the Committee will wish to understand how this is allowed for in any assessment of liabilities.
The FPA believes that a similar degree of scrutiny is needed for customers of non-registered plan providers and suggests that as far as possible, prospective customers, or their advisers, seek to find out answers to these questions from such companies.
FPA register providers have to subject themselves to the FPA’s complaints procedure through conciliation and arbitration provided by IDRS Ltd (a subsidiary of The Centre for Effective Dispute Resolution). In addition, they have to be part of the FPA Pledge to Customers.
This means that, in the unlikely event of a Registered Provider becoming insolvent, the other Registered Providers shall co-operate and examine ways in which the FPA might assist in arranging delivery of the funerals of customers of the insolvent Registered Provider.