“We believe this is more appropriate through the FPA: it has been designed to deal with prepaid products and it will be relatively quick and easy to implement the necessary framework across the industry.”
Ms Grahame also argues that the nature of a prepaid plan sets it apart from other financial services products. “When someone takes out a prepaid plan they are paying for a defined funeral. There is no investment risk: it is more like buying a voucher,” she adds.
With any shift in regulation, striking the right balance between consumer protection and choice can be tricky. Given the large number of prepaid plans that are sold through funeral directors, the introduction of more robust FCA regulation could potentially be a disadvantage to some consumers, significantly reducing the choice of products and distribution channels and potentially pushing up costs.
Advice opportunities
Whichever route the government takes, the introduction of appropriate regulation across the funeral plan market should also help advisers to discuss these products with their clients. “Funeral plans should be considered as part of a holistic financial planning review,” says Ms Griffin. “An adviser can help a client determine which option is most appropriate when it comes to planning for the costs associated with a funeral.”
With so many different options available for funding future funeral costs, the government’s decision to consult on tougher regulation for the prepaid plan sector is very welcome.
As well as offering greater protection to consumers wishing to plan ahead for these ever-increasing costs, it will give advisers more confidence to include these types of products within their client recommendations.
BIG NUMBERS
£4,078
Average cost of a basic funeral(SunLife, Cost of Dying Report 2017)
£5,951
Cost of the average funeral in the most expensive place to die – London (SunLife)
70.6%
Increase in the cost of a basic funeral over the past decade (SunLife)
£2bn+
Size of the UK funeral market(Competition and Markets Authority)
597,000
Number of reported deaths in the UK in 2016 (ONS)
