Funeral Plan Industry

Abena Oppong-Asare Excerpts

Thursday 26th May 2022 Westminster Hall

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Cummins. I congratulate the hon. Member for Telford (Lucy Allan) on securing the debate. She set out some important issues in her opening speech. I thank my right hon. Friend the Member for North Durham (Mr Jones) and my hon. Friend the Member for Putney (Fleur Anderson) for sharing their constituents’ stories and for their work in this area, which they have been doing for some time.

Many examples that hon. Members cited were extremely worrying and were distressing for those concerned. Funerals are clearly important and sensitive moments for families as they say goodbye to their loved ones. They should not be moments where families have to worry about money. As the hon. Member for Telford and my hon. Friend the Member for Putney pointed out, not many families would have reached out to their MPs during their moment of grief for further assistance in this matter.

That is why the collapse in March of Safe Hands, a prepaid funeral plan company, has left its 45,000 customers in such a distressing situation. Those customers have now been told they will lose up to 90% of the money they had invested in their funeral plans. In many cases, this will see them lose thousands of pounds. It appears that in the case of Safe Hands, customers’ money was invested in high-risk investments, as well as being distributed to directors in loans and dividends. Will the Minister set out the facts, as he understands them, about this particular case?

It is very welcome that Dignity, one of the UK’s biggest undertakers, has agreed to provide funerals for Safe Hands customers on a not-for-profit basis for the next six months. I echo what the hon. Member for Telford said about thanking Dignity for its work in this area.

As we have heard, the collapse of Safe Hands comes at a critical moment for the funeral plan industry, which will come under the remit of the Financial Conduct Authority from 29 July this year, so I welcome the opportunity to debate the industry and press the Minister on the steps the Government are taking in this area. I do not intend to speak for long, but I have a number of questions for the Minister about how Safe Hands’s collapse was allowed to happen and how we can be reassured that the action the FCA is taking will be sufficient.

First, when did the Government begin to assess the significant risks in the prepaid financial plan sector? Fairer Finance has said that Safe Hands’s collapse was on the cards for some time. Indeed, its managing director has written that firms such as Safe Hands were playing fast and loose with clients’ cash, and other hon. Members have also raised that point. Does the Minister think the new system of regulation was too slow to be developed and introduced, particularly given that the risks were known for some time?

Secondly, does the Minister think there are systemic risks in the sector, rather than just problems with individual firms? Thirdly, will he tell us about the work he is doing with the FCA to protect people who have plans with companies that do not become authorised with the FCA or merge with another firm? Of course, we welcome the FCA’s regulation—recent events have shown how necessary it is—but we must be reassured that the process of moving to the new system does not put more people’s money at risk. When I last checked, 14 firms had withdrawn their applications for FCA regulation, four firms had not made any application at all, and 16 firms intended to transfer their plans to another provider. As my hon. Friend the Member for Putney said, the customers of all those companies need clarity and certainty about what will happen to their plans and money.

I want to end by making a slightly broader point about consumer protection and regulation. Clearly, the Treasury cannot underwrite every single financial product in this country, but that is exactly why consumers deserve robust regulation of the industries concerned. It is increasingly clear that the Government are too often willing to leave individuals to fend for themselves in self-regulated markets, rather than take action to protect consumers. For instance, why have they delayed the insolvency and audit reform Bills that are needed to regulate those sectors properly? Why has the Digital Markets, Competition and Consumer Bill been published only in draft form, with no clear timetable for it to become law? Finally, and most relevant to this debate, why did it take the Government so long to regulate the funeral plan sector properly? The customers of Safe Hands with prepaid funeral plans deserve answers to those questions; I hope the Minister is able to provide an answer.