Questions (Sir John Hayes)
To ask the Chancellor of the Exchequer, if he will publish his timetable for bringing forward legislative proposals on pre-paid funeral plans.
To ask the Chancellor of the Exchequer, if his Department will work with the (a) Financial Conduct Authority and (b) death care sector on a solution for pre-paid funeral plans that takes account of (i) consumers and (ii) businesses.
To ask the Chancellor of the Exchequer, what assessment his Department has made of the potential effect of changes to the regulation of pre-paid funeral plans on smaller providers within that sector.
Answer (John Glen)
Following comprehensive consultation and stakeholder engagement, in January 2021 secondary legislation was made to bring pre-paid funeral plan firms within the remit of the Financial Conduct Authority (FCA). This change will protect consumers by ensuring that, for the first time, all firms that sell and administer pre-paid funeral plans are subject to compulsory and robust regulation.
The new regulatory framework will come fully into force in July 2022, following an 18-month transition period. The FCA’s consultation on rules for the sector closed on 13 April 2021, and the Government will continue to work closely with the FCA to ensure that the implementation of the new regulatory framework goes well.
The legislation allows intermediaries such as funeral directors to become “appointed representatives” of the funeral plan providers whose plans they sell or intermediate. The provider, known as the “principal” firm, would be responsible for ensuring their appointed representatives comply with the relevant rules for selling plans. This results in a proportionate approach, whereby smaller firms that operate as intermediaries will be required to follow the rules that protect consumers, without necessarily needing to undergo full FCA authorisation. To support these small firms during the transition period the FCA will reach out to the industry to explain their regulatory standards and expectations regarding the authorisation gateway.
The FCA is examining feedback concerning competition and smaller plan providers, among other things, as part of its consideration of responses to its consultation. The FCA will consider this feedback in the context of its operational objectives – which include ensuring an appropriate degree of protection for consumers and promoting effective competition in consumers’ interests – as part of its decisions on the regime.
The FCA’s consultation proposed that funeral plans should be brought within the scope of the Financial Services Compensation Scheme. The Government is currently considering whether further legislation is required to ensure the Compensation Scheme would operate effectively for consumers, if it covered this sector.