We must not let funeral plan industry prey on fear - Lucy Allan

They may have struggled with the cost of a funeral when their spouse died, and they do not want to burden their children with the same anxiety. They may fear the shame of a local authority funeral—a pauper’s burial. These are people who have worked hard and saved hard, and they want some piece of mind at the end of life.

They are not people who grab the headlines and demand the limelight or who, when something goes wrong, take to Twitter, call their lawyer or send emails in capital letters to their MP twice a day.

They may even be quite reluctant to contact their MP, and if they do, it will be politely understated. For that reason it is all the more important that we are here today to ensure that their voices are heard in this place, and I am very grateful to all Members for attending the debate.

The funeral plan industry sees these people, who I think we can all agree are vulnerable, as a lucrative target market. Until now, it has certainly been a huge growth industry. Today, 1.6 million people hold a funeral plan, with 218,000 people taking out a new plan only last year and with over £4 billion in funds under management held in plans. There is huge trust placed in funeral plan providers by vulnerable people, yet this lucrative industry is unregulated.

The Funeral Planning Authority held itself out as providing some form of oversight, giving itself a veneer of respectability as a quasi-regulator, but it was not, and we have to remember that the industry is entirely unregulated, despite any appearances to the contrary.

The Minister rightly took steps some years ago to rectify that omission, and I pay tribute to him for that. Of course, there are good providers, such as Dignity and Co-op Funeralcare, which care about good governance and are working to ensure that this unregulated industry is brought within the perimeter of the Financial Conduct Authority by 29 July.

However, that creates challenges for the industry, because some providers have not applied to be regulated and some have not been accepted for regulation, for good reason. There are concerns about where that will leave people who hold plans with those providers. I have had useful meetings with Dignity and the FCA, and I am grateful to them for their work in this area.

Let us make no mistake: this is an industry with a record of using high-pressure selling techniques, such as cold calling, telesales and having a sales rep sit in someone’s kitchen until they sign on the dotted line.

People sign up for some extraordinary fee arrangements, whereby 25 per cent of the plan could be taken as commission. Then there is the use of intermediaries, such as will writers, to sell a funeral plan as if it were an add-on, when all people really wanted was a will.

They are told that their money is held in trust and overseen by independent trustees, and that it will be ringfenced and invested in blue-chip equities, yet there is a complete lack of transparency as to how their money is invested.

Then there is the playing on people’s fears, and I am afraid that even the more reputable companies tell people that a funeral plan is an essential part of end-of-life planning.

The industry knows that nobody needs a funeral plan. Let us not pretend otherwise. A person can tell their children what they want when they die and put their monthly contribution into an ISA or bank account. Why risk it with a funeral plan? Why pay exceptional commissions? If their estate is valued at less than a few thousand pounds, the cost of the funeral gets the first call on the deceased’s assets. If there are no assets at all, the local authority picks up the cost.

I am very concerned that some industry lobbyists are seeking to water down the FCA regulatory proposals and are lobbying MPs to that end, and I urge the Minister (the Economic Secretary to the Treasury, John Glen) and the FCA to stand firm. These are vulnerable savers and they must have the gold standard of protection.

Watering down the proposed new regulatory regime for the industry would make it easier to become regulated. I understand that we do not want to exclude providers from regulation altogether, but it would be counterproductive. We have been there with the FPA, as we have seen, has provided no regulation whatever, just the veneer of regulation or some form of respectability.

*This is an edited excerpt of a Parliamentary speech by the Conservative MP for Telford, who also sits on the Health and Social Care Committee.