This is the one financial product you should never buy

I’ve never been a fan of funeral plans. The fact that they are now regulated by the city’s regulator, the Financial Conduct Authority (FCA), hasn’t changed my mind.

Like many insurance policies, funeral plans give you peace of mind—until you make the claim. Around 200,000 people who bought a funeral plan believing it would give them a hassle-free goodbye when they die woke up last weekend to find the company that had stolen thousands of pounds from them was going out of business became. These customers lose all or most of their money and at best are given to another provider who may or may not give them the funeral they bought.

On July 29, the FCA began regulating funeral plans, and no unregulated firm is allowed to sell them. It has banned cold calling — 30 percent of those with a plan said they felt pressured to buy, many through cold calling. It has also banned commissions for agents who find clients, which average £550 a time. The FCA said that “consumers pay a commission over the price of their plan” but businesses are not forced to drop prices.

When the regulatory process began there were 67 companies in the funeral industry. Only 26 of these are now approved. Ten were rejected and some of them went bankrupt. Another 13 are unable to sell plans but have until October 31 to transact, and 18 have found an authorized firm to take on their customers.

If you have a plan, check the status of your provider on and search for ‘funeral plan’. The FCA has cleared the list of authorized firms and is referring you to the easy-to-use Financial Services Register.

The 18 companies that have transferred customers are not listed anywhere.

Intervention was required after both the Competition and Markets Authority (CMA) and FCA discovered the poor state of the funerals industry. The CMA warned in 2020 that funeral homes are exploiting clients at one of the most vulnerable and stressful times of their lives.

Her “sunlight remedies,” as she called them, included prohibiting funeral homes, hospices and nursing homes from paying to recommend them to grieving loved ones. It also asked them to provide pricing information in a clear and standardized way so customers could compare them with each other. It claimed customers could save £1,000 or more. These rules began in September last year.

But the real concern was the £4billion market for funeral plans. Around 200,000 were sold a year to customers who paid either a lump sum or monthly installments to purchase a funeral in advance and, the marketing said, relieved their loved ones of both the expense and difficult decisions at a time of their grief. The money paid should have been placed in a trust fund to protect it even if the company goes bust. But in many cases that didn’t happen.

One company, Safe Hands, with around 45,000 customers, went bankrupt in March. One regulated provider, Dignity, has announced it will bury every deceased Safe Hands customer by October. However, after that, customers may ask for more money to convert their existing plan to a Dignity plan. Another provider, Unique Funeral Plans, is also under administration and is not letting customers hope for a funeral or refund.

Most of the 1.8 million current funeral plans are held by the 26 newly licensed firms. But the FCA concedes that one in eight plans isn’t, leaving 200,000 customers far from reassured.

I’ve never liked funeral plans, and not just because some were sold by shady companies and none came with a guarantee you’d get what you thought you paid for – the FCA found clients who often didn’t did. My objections are much more philosophical.

Firstly, if you leave behind at least a few thousand pounds when you die, your heirs can pay the cost. Your funeral is the first call in your estate. Banks can provide early access to cash for funeral expenses, and any decent undertaker will wait for payment until the estate is settled. People who do not leave behind enough to pay for their funeral should not set aside money that could help them while they are alive.

Secondly, a funeral is not for the dead but for the living. They should have the right to decide what they want to say goodbye to and how much of their inheritance to spend on it. Settled or not, it’s not worth buying funeral insurance. This is the one financial product you should never buy

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