It’s time to talk about death (and taxes)

It is not too late for the government to step in and provide some support for these victims – all of whom are elderly, and many of whom used the last of their savings to buy a now-worthless funeral plan

No one seems to like talking about death. Most times I try to write about it, I’m told by editors that it’s too depressing. It doesn’t get the clicks. But there are few things in life that are as ubiquitous as funerals.

We’ll all have one, and almost all of us will attend one – probably many. Funerals are big business. And the fact they are almost always bought at a time when customers are at their most vulnerable – in the very first days after a friend or relative has died – means those who sell and provide them deserve more scrutiny than they get.

I knew nothing about the funeral industry until my mother died six and a half years ago. I was stunned to discover the profit margins the firms in this market make, and even more shocked by the complete lack of regulation.

Anyone can set up a funeral parlour in England and Wales – they can store the deceased in their shed if they so wish. There’s no mandatory training for those that handle the deceased, no mandatory refrigeration – and there’s still no easy way to compare the cost of funerals in your local area to ensure you get the right package for your family at the right cost.

Although the Competition and Markets Authority had a good look at the market between 2018 and 2020, it decided against full regulation, or any price controls. And an update published this week seems to suggest it’s in no hurry to take any major action, in spite of the fact that most of the problems in the market – which it acknowledged in its final report – have still not been addressed.

Until very recently, pre-paid funeral plans – which allow you to arrange and pre-pay for your funeral before you die – were also largely unregulated. So not only was there no quality assurance on the funeral you would get, but there was also no guarantees that the thousands of pounds you handed over would be safe if you bought your funeral in advance.

In 2017, my company Fairer Finance spearheaded a campaign to get the prepaid market regulated. And although plans were announced to introduce regulations in 2018, they only came into force last July. Sadly, in the intervening five years, many more plans were sold by unscrupulous firms who took very large commissions, and did not leave enough in their trusts to cover the funerals they had promised. At the margins, some even committed fraud.

When the time came to get regulated, these firms had no hope of getting over the line – and several went bust, leaving customers high and dry. The biggest of these was the ironically named Safe Hands. Its 46,000 customers look unlikely to get more than 10p back for every £1 they handed over. The other major failure is One Life – which looks set to leave over 13,000 people with no more than around 2.5p for every pound.

Although new regulations always take a little while to make their way through the system, the funeral plan rules took even longer due to the legislative backlog caused by Brexit. However, this didn’t mean that nothing could have been done to prevent future losses.

While funeral plans did not fall squarely in the Financial Conduct Authority’s (FCA) remit, there was legislation which laid out some very basic rules around what firms should do with customers’ money. These were part of the Financial Services and Markets Act 2000, and stated that funeral plan firms could avoid regulation by the FCA as long as they either put customer money into a life insurance plan, or a trust. If they went for the trust option, the money needed to be managed by an independent fund manager and overseen by independent trustees.

Back in 2017, when we launched our campaign for regulation, we saw evidence that several firms in the market were not following these rules. We raised our concerns with both the Treasury and FCA; however, nothing was done.

What’s now becoming clear is that the vast majority of losses sustained by funeral plan customers happened in the years after the alarm was raised in 2017. Yet, nothing was done by either the Treasury, nor by its financial regulator.

The Treasury claims it could not have done anything as it is not a regulator. And the FCA claims it did not have the powers. But one of the two must surely be at fault. Either the Treasury created deficient regulation in 2000 – providing no way to enforce the rules it wrote – or the FCA was negligent in failing to act when concerns were brought to its attention in 2017.

A few of the victims of this debacle have been lucky. Customers of Pride Planning, for example – a firm with a depleted trust – were rescued by one of the two largest funeral firms, Dignity. Safe Hands customers who died after the firm went into administration in March 2022 – but before December – also had their funeral paid for by Dignity (although Dignity is now trying to reclaim these costs from the pot that belongs to those who are still alive).

But the vast majority of Safe Hands and One Life customers look set to lose almost all the money they paid.

Dignity and Co-op both made cut price funeral offers to Safe Hands customers last year – but anyone who did not take these up has now lost their chance. And while these offers certainly presented the very best option for Safe Hands customers, they still required most people to pay an extra £1,000 or more to secure the funeral they had already paid £3,500-£4,500 towards.

Both of these firms could have made much keener offers. Indeed, they once made a promise – as members of the Funeral Planning Authority (FPA) – that they would stand behind the customers of any fellow member firm that failed. Safe Hands was an FPA member – but no fellow members stood alongside it.

There must now be some accountability for these people’s losses. A number of victims have already started making complaints against the Treasury and referring them on to the parliamentary ombudsman. And I would like to see this followed up with an investigation by the Treasury select committee.

It is not too late for the government to step in and provide some support for these victims – all of whom are elderly, and many of whom used the last of their savings to buy a now-worthless funeral plan. The burden does not have to rest entirely on the taxpayer for this bailout. It is well within the government’s gift to raise the additional funds in taxation from the funeral plan industry over the next few years.

So far, the Treasury has resisted all calls to help. For now, that leaves victims no choice but to shout and use the system to try and agitate for justice. If you are a customer of Safe Hands or One Life, make sure you put in formal complaints to the Treasury as well as the FCA. And once the rejections come back, escalate them to the parliamentary ombudsman and the complaints commissioner.

It’s a scandal that rarely hits the headlines as, yes, death is depressing. But it’s in all our interests that our public institutions are held accountable for their failures, so they are not repeated.

James Daley is the managing director of the consumer group Fairer Finance