Ahead of the regulation of funeral plan providers, one has collapsed, leaving 45,000 customers in the lurch.
Safe Hands was a provider offering pre-paid funeral plans, which may now not be honoured.
Administrators have been appointed for the company and said they could not immediately refund customers.
The Financial Conduct Authority (FCA) will regulate the pre-paid funeral plan sector from 29th July. At that time, providers must be authorised and regulated by the FCA, offering significant consumer protection. Read more here.
There are dozens of unregulated funeral plan providers in the sector, raising concerns about more potential failures ahead of the introduction of regulation.
Nedim Ailyan is joint administrator and a partner at FRP, who will be conducting a detailed investigation into the collapse before calculating what can be returned to customers.
Money paid to Safe Hands by customers is held in a trust fund, but this is understood to have a shortfall compared to what is required to refund customers in full.
“Regrettably, the administration means the company is not in a position to issue refunds at this time. We appreciate how upsetting this period of uncertainty will be for Safe Hands Plans’ customers and their families.
“Unfortunately, there is a shortfall between the level of plan holder investments and the forecast level of funeral plan costs to be paid. Essentially, the value of the investments is not enough to meet the funeral plan obligations of the company.”
Read why you must make sure your Will is accessible.
For any funeral plans activated in the next fortnight, where the policyholder has died, another funeral provider, Dignity, will cover the funeral costs. The administrators seek a longer-term solution and have provided a helpline for customers, 0800 640 9928.
FCA reforms of the funeral plan sector follow concerns that vulnerable elderly customers have been subjected to unfair selling practices, including cold calling.
However, because the sector is not yet regulated, the FCA is limited in its ability to act in the case of Safe Hands, with a spokesperson saying:
“People who bought a pre-paid funeral plan with Safe Hands will be understandably concerned, which is why we welcome Dignity stepping in to provide funerals for the next two weeks.
“We will continue to support the administrators and industry to see whether there is a longer-term solution for Safe Hands’ customers.”
Mike Hilliar, director for funeral planning at Dignity, said:
“Dignity stands by its commitment to provide assistance where we can, and we will be working with others in the industry to come to a resolution to help customers of Safe Hands, or indeed of other plan providers that do not achieve authorisation with the regulator.”