FSCS protection of funeral plans – what you need to know

From 29 July 2022, the Financial Conduct Authority (FCA) will start regulating firms and intermediaries that provide and arrange pre-paid funeral plans.

As a result, if your constituents are customers of funeral plan providers that are FCA authorised from 29 July 2022, they will be protected by the Financial Services Compensation Scheme (FSCS) should the firm go out of business.

What is FSCS?

The Financial Services Compensation Scheme (FSCS) protects customers when financial firms fail. If a financial firm used by your constituents has gone out of business and cannot pay their claim, we can step in to pay compensation.

Set up by the government, we are independent, and our service is free to use. Customers keep 100% of any compensation owed when claiming directly through us.

The full range of financial products covered by FSCS includes banks and building societies, credit unions, pensions, investments, mortgages, insurance, debt management, PPI – and from 29 July 2022, funeral plans.

How will FSCS protect funeral plans?

Funeral plan provider claims

If a funeral plan provider goes out of business on or after 29 July 2022, it should have arrangements in place to ensure that a new regulated provider can carry out customers’ funeral plans. Alternatively, it may provide them with compensation.

If these arrangements aren’t in place, FSCS will protect your constituents if they are a holder of an authorised funeral plan from a provider that has failed.

We will work with the failed firm, the FCA and the insolvency practioner (IP) to ensure that we have all of the information we need. In most circumstances, customers won’t need to make a claim.

For all types of funeral plan claims, customers are protected up to £85,000 per person, per eligible firm.

Replacement funeral plan

Where possible, we will seek to give your constituents the option of entering into a new contract with a replacement regulated funeral plan provider. It would be a like-for-like replacement plan with the same terms as the customer’s original plan. Where that’s not possible, it would have terms as similar as possible to the original.

Before we complete this process, we’ll ask the customer if they want to receive replacement cover. If they don’t, they can choose to receive compensation for their plan instead.

Compensation

If the customer would rather receive compensation, FSCS will calculate the amount by reference to what it would cost to buy the same plan on today’s market.

If we aren’t able to arrange a replacement funeral plan, we will pay compensation on the same basis.

Other types of claim

From 29 July 2022, your constituents may also be able to claim compensation for certain activities carried out by a funeral plan provider or their intermediaries (e.g funeral directors and will writers). Examples include advice to take out a funeral plan or the way a funeral plan was set up.

The activity must have occurred on or after 29 July 2022.

Customers can check if they can claim for these types of activities on the FSCS website: https://claims.fscs.org.uk/PreScreening/EnterDetails

If a family member passes away and their funeral plan provider has failed

If a plan holder were to pass away after their funeral plan provider fails, but before:

1. FSCS has yet to secure a new funeral plan contract with a new provider or pay compensation; and
2. the IP of the provider is not able to secure the provision of a funeral,

then FSCS may be able to help with the provision of a funeral.

A customer’s nominated representative or next of kin will need to contact the named funeral director in the original funeral plan, who will advise them on next steps. This will be the named firm of undertakers under the terms of the funeral plan, or in the absence of this information, the firm of undertakers the nominated representative has selected.

Once the nominated representative has contacted the funeral director, they will need to notify us of their situation. They can contact us by phone, post or live chat – our customer service team is on hand to help.

More information

For more information on how we protect funeral plans, please visit:

https://www.fscs.org.uk/what-we-cover/funeral-plans

If you have any questions, you can also email us via stakeholders@fscs.org.uk