Funeral Plan Industry

Richard Thomson Excerpts

Thursday 26th May 2022 Westminster Hall

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Cummins. I congratulate the hon. Member for Telford (Lucy Allan) not only on securing this debate, but on the manner in which she has pursued this issue on behalf of her—and all of our—constituents.

Funeral plans are something that I have always tried to avoid considering, in the normal run of things. We have heard all about the hard sell that can go on, whether through the glossy brochures or the sales patter. However, the soft sell can be every bit as pernicious. Without being flippant, I gave an interview to a TV company that is, it is fair to say, a considerable way down the electronic programme guide from the BBC or ITV. While I was waiting to see when I would come on, it seemed that just about every other advert between programmes was for burial or cremation.

Clearly, an awful lot of marketing effort was going into that, and it was going straight into people’s homes uninvited. I was struck by the techniques—the soothing music, the images of sunsets and the reassuring voices talking about giving you and your loved ones peace of mind. Every heartstring was pulled about the inevitability of requiring a funeral, the reassurance that you would give your loved ones by taking responsibility in this way—you would be taking the worry out of things for yourself and your family—and the fact that it was all so incredibly easy, if only you phoned the 0800 number scrolling along the bottom of the screen. Clearly, that works; as we have heard, the industry is worth £4 billion.

I would like to dwell a little on the scandal of Safe Hands, which seems to have operated thoroughly dishonestly, exploiting that desire among very vulnerable people who did not wish to be a burden. Safe Hands had 47,000 customers and was supposedly operating a ringfenced trust fund in order to protect customer investments and guarantee that paid funeral whenever the time came. Instead, it has seen funds misappropriated, with a £2 million surplus being paid out to the company and another £2 million paid in shareholder dividends, in one particularly egregious set of transactions. I can only begin to imagine the distress that the collapse of this company has caused, not only to those who had invested their money in this plan and expected their family to have those end-of-life burdens eased, but also to those who had invested in similar, more reputable schemes.

The hon. Member for Telford has already filleted that company’s accounts far more cleanly than I could ever hope to, but I think it is worth dwelling on the fact that the private equity bank company used two fund managers to invest customers’ money, one of which has gone into liquidation. It has about £4 million in cash, as well as shares listed in UK firms, which can be sold. A significant proportion of that money went into high-risk investments—often offshore—and some £60 million of the trust assets were in those high-risk investments. Now the administrator, FRP Advisory, is saying that a more reasonable valuation would be somewhere between £10.6 million and £16.1 million, which means that customers might only expect to get, at tops, about one fifth of their investments back. That means that with the average cost of a funeral hitting about £3,000, customers may only get about £600 back.

From 29 July, the industry is to be regulated—in a financial sense, at least—by the Financial Conduct Authority. That is a very welcome and long-overdue measure. As has been said, a funeral plan is not in itself necessary to pay for a funeral. It is no more and no less than any other kind of financial savings product, and it ought to be regulated in exactly the same way, with the same level of transparency expected over fees, commissions and how it operates. Those who administer it should have the same amount of accountability, the same amount of due diligence should be expected and we should have the same solvency expectations as we would for any product of a similar nature.

While the regulation from 29 July is highly welcome, there is a danger to it coming in. As we have heard, 75 companies are on the radar, and slightly fewer than half have submitted an application to be authorised that is still current. Some 20 have indicated that they do not intend to apply or have yet to start the process of seeking that authorisation, and 13 have withdrawn from the process entirely. First, we need to make sure that as many as possible come under the umbrella of that regulation from 29 July. We need assurances for people who have funeral plans in those unregulated companies that their investments can be protected and that the products deliver what people were promised when they signed on the dotted line.

We also need to make sure that we are doing something for those who will inevitably be left high and dry. Dignity, one of the UK’s largest undertaking firms, has for the next six months agreed to provide funerals for Safe Hands customers on a not-for-profit basis, and it will thereafter look to offer plans to surviving customers. That is good, but we need to recognise the very real danger of market failure and other providers not stepping up. I am uncomfortable about that. We need to make sure that there is some form of safety net so that those customers are protected as far as is reasonably possible.

The hon. Member for Putney (Fleur Anderson) highlighted eloquently and knowledgably the issues around funeral poverty and how families can be pushed into debt at a time of enormous distress. Such families may, with the best will in the world, not be the most financially savvy, and in that time of grief they are that extra bit vulnerable, especially given the emotional distress and the timeframes involved in arranging a funeral. As a result, they may find themselves being pushed into choosing options that are not the best for them and that they would not take if they had a full gamut of advice available to them. It risks placing them in the hands of the unscrupulous and making poverty deeper than it needs to be.

Over the last few years, the Scottish Government have taken steps to try to assist with funeral poverty. They have been working to help people with funeral costs, including through the funeral support payment, which is one of eight social security benefits that have been devolved. That should be seen in the context of a wider set of actions that have been set out in the Scottish Government’s funeral costs plan, which is designed to reduce funeral poverty and help people to manage and mitigate the overall costs.

Social Security Scotland delivers the funeral support payment. It supports eligible individuals in receipt of low income benefits with a payment to help cover funeral costs. It is a one-off payment that helps to cover any reasonable burial or cremation fees and some travel costs, and it includes a standard flat rate of £1,000 when the client does not have a funeral plan.

That still leaves a great deal to be done. I am very attracted to the idea, which the hon. Member for Putney mentioned, of having a go-to section that does not direct people in any particular way but offers signposts to the various available funeral options. I think that has a great deal of merit, because simply knowing that there is a place where they can go to get information would give people a great deal of comfort in the time of their greatest distress.

This has been a useful and timely debate, but it is one that we will need to revisit, not just in terms of the impact of regulation and the benefits that that will bring, but because we need to consider the impact of companies that, for whatever reason, do not end up under the FCA’s regulation. Beyond the finances, we need to take a close look at a whole range of practices to ensure we protect the most vulnerable people in society, whether they are people taking measures to pay for their funerals in advance or relatives left behind at a time of great distress and vulnerability. I am sure that the hon. Members for Telford and for Putney will continue most ably to focus Members’ attention on that as we move forward.