Families who have paid thousands of pounds for funeral plans are desperately seeking reassurance that they will not be left out of pocket.
Last week we reported how a major industry clampdown this summer could mean that many providers are unable to deliver the funerals they have sold.
Since then we have been inundated with emails and letters from worried readers asking what they should do now and if their money is safe.
In the dark: Families who have paid thousands of pounds for funeral plans don’t know if the policies will turn out to be worthless
Many have purchased plans from Safe Hands — which has withdrawn its application for authorisation from the Financial Conduct Authority (FCA) watchdog and will be forced to cease trading from July 29.
Here consumer expert James Daley, managing director at Fairer Finance, helps answer your questions…
How do I know if my provider is safe?
Larger firms such as Dignity, Co-Op and Golden Charter should be fine. Ecclesiastical, which also goes by Perfect Choice, is another established insurance company, and Golden Leaves is a mid-sized provider that has been in business for many years.
However, we won’t know for sure which plan providers will be approved by the watchdog until nearer July as it is still assessing applications.
Has it applied for authorisation?
You can check to see your provider has applied to be authorised on the City watchdog’s website. Visit fca.org.uk/consumers/funeral-plans/providers-list and search for the name of your firm.
What if my firm hasn’t done this?
Contact the firm and ask them about it. It may be that it is transferring its plans to another provider.
If you cannot get a response, keep an eye out for more updates. The City watchdog hopes Dignity or one of the other large funeral providers will come forward to ensure customers still get the funeral they paid for if other firms stop trading.
Security: If your funeral plan provider was behaving properly then your money should have been invested in a trust and overseen by independent trustees
Am I protected by a regulator?
Currently, the Funeral Planning Authority is a voluntary regulator so does not have any real power and there is currently no compensation scheme if firms fail.
In theory, companies were only allowed into the FPA if they were willing to disclose their financial position and make commitments to repair any deficits in their trusts.
But it doesn’t mean they will be approved to continue trading when they come under the FCA’s remit — as we have seen with Safe Hands.
I saved with Safe Hands but now face a £3,795 loss
Out of pocket: Linda Lowe, 69, paid £3,795 for a Safe Hands funeral plan in 2017
Linda Lowe, 69, paid £3,795 for a Safe Hands funeral plan in 2017 so her only daughter wouldn’t have to worry about money when the time came.
The retired grandmother-of-two wants to be cremated, with her ashes placed next to her late husband Joseph’s plot in Reigate, Surrey.
She found Safe Hands after searching for funeral plans on Google and called to make sure her cash would be safe before sending a cheque.
Linda, who lives in Haywards Heath, West Sussex, says: ‘I asked several times and was assured it would be safe.
‘On the back of the brochure it said the money was ‘invested securely’ in a trust fund and I assumed that meant I would be fine if the company went bust.’
But when she rang again last week after learning the firm had withdrawn its application for authorisation by the City watchdog, she could not get a clear answer.
‘I feel betrayed. I would have never taken the plan out if I didn’t think my money would be safe,’ she says.
Isn’t the money in an independent trust?
If your funeral plan provider was behaving properly then yes, your money should have been invested in a trust and been overseen by independent trustees.
However, as there was no formal regulation, no one was checking that firms were following the law.
We suspect that some firms may have told people their money was safe while not necessarily following the rules. But we won’t know for sure how bad the situation is until regulation comes in.
What should Safe Hands customers do?
Sit tight. Safe Hands is talking to a number of funeral plan providers to ensure plans are delivered even if there’s not enough money in its trust.
One of the largest funeral providers, Dignity, has also pledged to deliver every underfunded plan if necessary so it is unlikely that you will lose all your money. We hope more details will be announced soon.
Hundreds lose out as company shuts down
Hundreds of customers who have paid for a funeral plan with Heavenly Services Ltd are out of pocket after the firm collapsed last month.
Among them are Linda Smith, who paid £1,700 for a funeral plan in September after being diagnosed with terminal cancer. The former carer purchased the plan after finding out she had just two to five years to live.
Linda, 53, says: ‘I had shopped around but the bigger firms were more expensive. I was told my plan was ‘guaranteed’ and that made me feel secure.’
The Grimsby Town FC fan wanted a simple ceremony and to be cremated in her Dr Martens and team shirt.
However, in January she and her husband Roy received a letter from Heavenly Services’ liquidators, Auker Rhodes, informing them the Hull-based company was to be liquidated.
She is one of at least 370 customers. With no compensation scheme in place, it is unlikely they will get their money back.
Linda says: ‘It never crossed my mind a funeral plan company might behave like this.
The Government should step in and get customers at least 10 per cent of their cash back.’
Should I cancel my plan?
If there is no cost to cancel and you are worried your provider may fail, it may be worth asking if you can get your money back.
But most customers will have to pay a cancellation fee, which can range from a couple of hundred pounds to thousands if your plan is older — which would mean locking in a loss.
So if you are past the 30-day cooling off period, wait and see how things pan out.
What if I am making monthly payments?
If you stop your monthly payments, then you are effectively cancelling your plan and your provider would be within its rights to deduct a termination fee from any refund you receive.
It’s probably best to continue paying for now.
Can my credit card provider refund me?
If your funeral plan provider goes bust and you paid by credit card, you should be able to reclaim your money under section 75 of the Consumer Credit Act.
Alternatively, if you paid by debit card there is a similar chargeback scheme, but there may be time limits on refunds. And you cannot claim until your provider ceases trading.
Should I wait until after July?
You don’t necessarily need to wait until then. Good funeral plans are still good products and there are still plenty of reputable firms. But for now, stick to larger companies such as Co-op, Dignity and Golden Charter.
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