Pre-paid funeral plans will soon become the responsibility of the Financial Conduct Authority (FCA) adding the sector to its supervisions by July 2022. The pre-paid funeral plan sector was previously unregulated but was formally supervised by the Funeral Planning Authority (FPA) an association which funeral plan providers could be elective members of.
Pre-paid funeral plans refer to a product where a consumer can pay for their funeral early and secure the price of the funeral against current inflation rates. This confers certain benefits as funerals are increasing in price thus the product allows for consumers to gain certainty and prevent the extended family from paying the short fall. Pre-paid funeral plans currently can be paid in monthly instalments or for an upfront cost. The FCA may examine these payments and regulate them as the monthly instalments may end up costing more than the actual funeral proceeding[i].
The FCA has acknowledged the addition to their remit and have outlined their plan for the next 18 months[ii]. The FCA will initially publish a consultation paper within the first quarter of 2021 asking for input from funeral plan providers and other concerned parties. This period will outline changes to FCA regulation to accommodate this move and the fees the FCA will levy against these firms. The FCA has already outlined two permissions for Funeral Plan providers but for the brokers the Financial Services and Markets Act 2000 part 4A insurance permissions will cover their regulated activity.
The FCA anticipates applications for firms to apply for authorisation to commence within the third quarter of 2021, which allocates for a 10-month window for firms to apply, seek a principal firm (to become an appointed representative) or discontinue the activity before July 2022. If your firm is already authorised for another activity must apply for a variation of permissions (VOP) to include the funeral plan distribution and/or funeral plan undertaking.
The move to regulate the sector by the FCA was met with some criticism from the FPA which suggested the new regulatory burdens placed on funeral plan firms would result in reduced competition, less choice for consumers, and lead to higher prices[iii].
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