Erika Parker

New FCA Regulations for Funeral Plans Published


05 July 2021

Today the FCA published PS21/8: Regulation of funeral plans - Feedback to CP21/4 and final rules | FCA. The FCA has set out the final rules for how they will regulate all funeral plans, including small and closed book firms, from 29 July 2022. This is also the date that the Financial Ombudsman Service will take on funeral plan complaints. 

The FCA is encouraging firms to consider these final rules and decide whether or not they want to continue beyond 29 July 2022. Those firms that do not want to continue need to engage with FCA by e-mailing 

The FCA is encouraging funeral plan providers who do want to continue beyond 29 July 2022 to apply for FCA authorisation as soon as possible after the applications gateway opens on 1 September 2021, to ensure authorisation in time. 

FCA have issued guidance on the authorisation application process on their website at Pre-paid funeral plans firms: apply for authorisation | FCA.  This requires funeral plan providers to (amongst other things): 

  • Pay one-off and annual authorisation application fees to FCA.  The amounts will be confirmed later this month, but the one-off fee is expected to be £10,000. 
  • Commit to submitting annual audited regulatory returns (or, for trust-backed plans, annual Solvency Assessment Reports) provided by an actuary, showing that liabilities can be met. 
  • Provide a regulatory business plan, which should include analysis of key business and regulatory risks showing how they will be managed including scenario testing, and 3-year financial projections. 
  • Provide a wind-down plan. 
  • Have business continuity and disaster recovery plans in place. 

The final rules in PS21/8 are not significantly different to those proposed in the consultation CP21/4.  The key takeaways from the final rules are: 

  • The frequency of statements to consumers has been changed from being required annually to once every three years. 
  • Firms may impose a 2-year rather than 1-year moratorium from the point of sale on the payment of funeral benefits, in line with the periods generally available in the over 50s life insurance sector. 
  • The requirement for an individual performing the Appointed Representative Customer  Function (CF30) to be approved by FCA has been removed in the final rules. 
  • Commission payments to intermediaries will be banned, as per the original consultation, with fee arrangements being allowed instead. 
  • The proposed rules around risk transfer and prudential soundness are being amended and are now subject to further consultation as part of the newly published CP21/20: Regulation of funeral plans - Further proposals | FCA. 

Erika Parker, Consultant Actuary at OAC, commented, “We recommend that funeral plan providers start the transition to the new FCA regulation, including the authorisation application process, as soon as possible. With the new requirements being quite onerous for small providers, we expect that some will decide to wind down and seek to transfer to larger providers.” 

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