Why Brits could still be left out of pocket when using pre-paid funeral plans
A MASSIVE crackdown on pre-paid funeral plan firms has been rolled out – but punters are still at risk.
With burials costing £4,380 and cremations £3,290, on average, spreading the cost with a prepayment plan can seem like a worry lifted.
But thousands of customers have been left out of pocket after a flurry of failures from funeral-plan companies.
Providers must now comply with tougher rules set by City watchdog the Financial Conduct Authority. Here we explain why thousands of customers could still lose out.
WHAT IS A FUNERAL PLAN?
A PRE-PAID funeral plan allows you to pay upfront for your send-off, so relatives don’t have to cover the costs and you have peace of mind.
Firms now need to be authorised by the Financial Conduct Authority to sell plans, as of July 29. Customers with a plan from an FCA-authorised firm can now claim compensation if things go wrong.
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And complaints about authorised firms can be adjudicated by the Financial Services Compensation Scheme.
You can find the list of 26 authorised firms on the FCA website at .
THOUSANDS AT RISK
HUNDREDS of thousands of customers bought plans from 13 firms that have been told to transfer or refund customers. They have until October 31 to do this.
But some firms, such as Safe Hands Limited, Not For Profit Funeral Plans and Ready4Retirement, went bust before regulation was in place.
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Customers of these firms are not protected under the new rules and need to try to recoup losses from credit card firms or banks.
Under Section 75 of the Consumer Credit Act, you can request a refund from your credit card company if a company you used goes bust.
Chargeback allows your bank to reverse a debit card payment.
SNEAKY FEES
YOUR family could still be left with an expensive surprise after you die as some policies do not include common fees, such as coroner costs and burial plots.
personal finance expert James Andrews said: “Some cheaper plans even specify the dates that are acceptable too, meaning some loved ones could miss out if they can’t make it in time.”
Customers can usually pay for plans in one lump sum or in smaller payments over a number of months, but you’ll be charged a fee for doing the latter.
“Choosing to split your payments over several years can add a considerable amount to the overall costs of the plan,” James said. It could also mean you die before the plan is fully paid off — leaving family to foot the rest of the bill.
A WORD OF WARNING
IF you’re on a low income, you might be able to get Government cash to help pay for your send-off.
Some essential costs will be covered, including burial plot fees, crematorium costs, travel arrangements and paperwork such as death certificates.
You can also get up to £1,000 for other expenses, such as flowers and a coffin. To qualify, you or your partner will need to claim benefits including Universal Credit.
But if you’ve signed up for a pre-paid funeral plan, you’ll only be able to get £120 for items not covered in your contract, according to charity Independent Age.
Collapse left pair facing £6,500 loss
TOM Barkes’s heart sank as he read the letter stating his pre-paid funeral plan provider had gone bust and he might have lost £6,570.
His wife Margaret was in tears as they had each taken out a plan worth £3,285 with Not For Profit Funeral Plans in 2019.
Tom, 70, and Margaret, 71, were distraught when they found out the Financial Conduct Authority had recently banned their provider.
The firm told them to try getting a refund through a chargeback from their bank, but as they had taken out the plan in 2019 they were unsure if they would be able to.
Under a chargeback, your bank reclaims your cash for you, but you only have 120 days from purchase to make the claim.
Worried they would be left thousands of pounds out of pocket, the couple contacted The Sun’s Money team for help.
Tom said: “I was absolutely gutted, and my wife was in tears. We can’t afford to lose this money.”
After we looked into it, Lloyds Bank investigated the case and refunded the couple in full.
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A Lloyds spokesman said: “Mr Barkes got in touch about his issue with Not For Profit in mid-July and we have been taking the steps needed to review his case.
“We’ve now finished looking into things and have contacted Mr Barkes to arrange his payment.”
MORTGAGES ON ICE AS RATES RISE UPS DEMAND
By Holly Mead
MORTGAGE lenders are blocking new applications from buyers amid a flurry of demand as interest rates rise.
At least four mortgage providers this week temporarily stopped processing applications.
Coventry Building Society, Cambridge Building Society, Saffron Building Society and Suffolk Building Society all hit the pause button on new business.
Rising interest rates led to a rush of buyers applying for mortgages to lock in a fixed deal before any further hikes.
Ray Boulger, technical director at broker John Charcol, said: “Lenders with the most competitive deals are receiving more applications than they can cope with, so they can either increase their rates to reduce applications or temporarily withdraw from the market.”
Suffolk Building Society said it had temporarily paused applications to clear its backlog.
It said: “The team is working hard to process its existing pipeline, with a view to getting all cases to offer and completion stages as quickly as possible.”
Coventry Building Society was due to re-open applications two days ago after a temporary pause came into effect on August 4. Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “We decided to pause activity so we could protect service levels to mortgage brokers and their customers.”
Cambridge Building Society said it was still accepting new applications from “direct channels” but not through brokers. The lender said the move was temporary and it is constantly monitoring the situation.
Saffron Building Society also paused new applications. Head of mortgage sales Tony Hall said: “It would have been unsustainable to proceed with so many new applications and still deliver the service we are renowned for. This is a temporary solution.”
HSBC, Nationwide and Santander said they had no plans to stop applications currently. The situation is not unprecedented and buyers should not panic. David Hollingworth, director at mortgage broker London & Country, added: “We have seen this before and it’s usually temporary, only lasting a few days.”
Boulger points out there are still more than 100 lenders in the market: “So, if a few temporarily withdraw, it still leaves borrowers with plenty of choice.”
According to Moneyfacts, there are 149 fewer deals available on the market than in July, but there are still more than 4,400 to choose from. Applications are, however, taking longer to be approved amid a deluge of demand.
Hollingworth said: “A few years ago, a mortgage application would only take two weeks. Now you should expect it to take at least four weeks.” Using an independent mortgage broker can help ensure you get the best deal available, even if some providers aren’t accepting new applications.
If you are hoping to buy a home soon, you can lock in a mortgage rate up to six months in advance.
