Customers who prepaid for their funerals face losing that money as funeral plan provider Safe Hands falls into administration.
The restructuring firm appointed to handle the process, FRP Advisory, said there were insufficient funds to immediately and fully refund Safe Hands’ 46,000 customers, raising the possibility that pre-bought funerals might not be honoured.
Dignity, one of the UK’s largest undertakers, will provide funerals on behalf of Safe Hands for the next fortnight.
But beyond that, Safe Hands is “uncertain that the funeral plans will be able to be fulfilled,” the firm’s website said.
Customers should consider their plans “terminated with immediate effect,” Safe Hands wrote. “This includes funeral plans that were part-paid and funeral plans that were being processed. No further direct debit or standing order instalments will be collected.”
FRP said it was appointed by the Wakefield-based company “after a period of severe financial challenge, which has left the business unsustainable in its current form.”
With the average funeral costing over £4,000, many people make arrangements while they’re living to cover these costs. Options include life insurance policies with funeral cover and over-50s life insurance products.
Around 30% of people who make provisions for their funeral opt for pre-paid funeral plans. With these plans, customers pay either a lump sum or monthly instalments to a plan provider, which then invests the money, either in a trust fund or an insurance plan, so it can be paid out when a customer dies. Most plans cost over £3,000.
However, providers of funeral plans haven’t face tough enough regulation, the Treasury concluded in 2018, after concerns raised by Citizens Advice Scotland and Fairer Finance that people were being pressured and misled by providers and had little recourse when things go awry.
From July of this year, the Financial Conduct Authority (FCA) will regulate the sector. The FCA’s supervision will give customers more protection in the event a funeral plan provider falls into administration.
But because Safe Hands was not currently under the FCA’s jurisdiction, there’s little the regulator can do to help its customers.
A spokesperson for the FCA said: “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.”
FRP Advisory said it’s looking for a potential buyer for the beleaguered business. The administration will also carry out a detailed investigation to find out what money could be returned to creditors, including policyholders.
But “unfortunately, there is a shortfall between the level of plan holder investments and the forecast level of funeral plan costs to be paid,” said Nedim Ailyan, one of the administrators. “Essentially, the value of the investments is not enough to meet the funeral plan obligations of the company.”
The process of realising assets from the firm and issuing partial repayments to policyholders will take some time to complete, the administrators said. They will contact plan holders to detail how they can register a claim.
"A dedicated UK based customer service team has been established... to assist you with any questions you may have in respect of the administration, the defined role of Dignity, the impact of the administration on your plan and any potential return of the money you have invested,” the administrators said in a statement.
“You will receive written communication in the post within the next seven days.”
