FCA Regulation of Funeral Plans UK: What Changed in 2022

Why funeral plans were brought under FCA rules

For years, pre-paid funeral plans operated largely outside the financial regulation that applies to insurance and investments. Oversight relied substantially on a voluntary self-regulatory body, which not every provider joined. That gap left some customers exposed to high-pressure sales, unclear terms, and uncertainty about what would happen to their money if a provider collapsed. Several high-profile concerns about the sector built pressure for a statutory regulator to step in.

The government legislated to bring the sector into the Financial Conduct Authority's remit, and the FCA set 29 July 2022 as the date its rules took effect. The aim was to apply the same baseline standards that other financial products already met: clear information, fair treatment, secure handling of customer money, and a route to independent redress. The change was intended to be a structural reset rather than a light-touch tweak.

Providers had to choose: secure FCA authorisation and meet the new standards, transfer their existing plans to an authorised firm, or exit the market and wind down their book. Firms that did not become authorised were not permitted to keep selling, which reshaped the supplier landscape ahead of the deadline.

The core conduct standards introduced

At the heart of the regime are conduct rules requiring firms to treat customers fairly throughout the life of a plan. Providers must give clear, balanced pre-sale information so a buyer understands what is and is not covered, the difference between guaranteed costs and allowances, and the cancellation terms. Plans must also offer fair value, meaning the price has to be justifiable against what the customer receives.

One of the most visible changes was the ban on cold-calling to sell funeral plans. Unsolicited sales calls had been a recurring source of complaint, and prohibiting them removed a channel associated with pressure selling to often-elderly customers. Commission arrangements that could distort advice were also reined in under the FCA framework.

Firms must additionally have proper systems for handling complaints and must signpost customers to independent redress when a complaint cannot be resolved internally. This brought funeral plan administration into line with how regulated insurers and intermediaries already had to operate.

How customer money is now protected

A defining feature of the post-2022 regime is the security of plan money. Authorised providers cannot simply absorb a customer's payments into general company cash. Funds must be held either in a trust that is independently governed and subject to actuarial oversight, or used to buy a whole-of-life insurance contract that funds the funeral when the customer dies. Either route is designed to ring-fence the money so it is available for its intended purpose.

This structure matters most if a provider gets into financial difficulty. Because the money is segregated, it is not freely available to the failed company's creditors. The arrangement supports the funeral being delivered as planned even where the seller is no longer trading, which was a key weakness the old self-regulated model could not consistently address.

The trust-or-insurance requirement also brings ongoing scrutiny. Trusts must be funded adequately to meet expected future funeral costs, and the regime expects providers to manage that solvency responsibly rather than rely on new sales to fund old plans.

The new routes to redress and compensation

Two backstops define the consumer protection a customer now enjoys. The first is the Financial Ombudsman Service. If a customer believes an authorised provider has treated them unfairly, mis-sold a plan, or wrongly refused a claim or refund, they can escalate to the Ombudsman free of charge once the firm's own complaints process is exhausted. The Ombudsman can direct a firm to put things right.

The second is the Financial Services Compensation Scheme. If an authorised provider becomes insolvent and cannot meet its obligations, the FSCS can protect the plan. Depending on the circumstances, that can mean the funeral is still delivered or the customer's money is returned. Crucially, both protections apply only where the provider is FCA-authorised, which is why checking the Financial Services Register before buying is essential.

Together, the Ombudsman and the FSCS give funeral plan customers the same kind of safety net long available to buyers of insurance and other regulated products. That parity was the central purpose of bringing the sector under the FCA.

What buyers should do under the new regime

The practical takeaway is to use the protections the regime provides. Before paying, confirm the provider appears on the FCA Financial Services Register, since dealing with an unauthorised seller forfeits the Ombudsman and FSCS safeguards. Read the key features document to see which third-party costs are guaranteed and which are merely an allowance, because that distinction drives what a family may have to pay later.

If something goes wrong, customers should use the firm's complaints process first and then the Financial Ombudsman Service if needed. Keeping the plan documents accessible, and telling the family who the provider is and how to claim, ensures the protections can actually be used at the time of death.

For people who bought plans before July 2022, it is worth confirming whether their plan was transferred to an authorised provider during the transition, as this determines whether the current protections apply. The provider or the FCA Register can confirm a plan's current status.

Frequently asked questions

When did the FCA start regulating funeral plans?

FCA regulation of pre-paid funeral plans began on 29 July 2022. From that date, any firm selling or administering plans had to be authorised, and providers that were not authorised could no longer sell plans.

What protections did customers gain in 2022?

Customers gained sector-wide access to the Financial Ombudsman Service for complaints and to the Financial Services Compensation Scheme if an authorised provider fails. Firms also have to treat customers fairly, give clear information, and hold plan money securely.

Can funeral plan companies cold-call me?

No. The FCA regime bans cold-calling to sell funeral plans. Any unsolicited sales call offering a funeral plan should be treated with caution, and the seller's authorisation should be checked on the FCA Register.

How is my funeral plan money kept safe under FCA rules?

Authorised providers must hold plan money in an independently overseen trust or back it with a whole-of-life insurance contract. This ring-fences the money from the company's own funds so it is available to pay for the funeral.

What if my provider failed before July 2022?

Plans bought before regulation may have been transferred to an authorised provider during the transition. Whether current FCA protections apply depends on that transfer, so check the plan's status with the provider or on the FCA Financial Services Register.

Do I have to do anything for an existing plan to be protected?

If your plan is with an FCA-authorised provider, the protections apply automatically. It is still sensible to confirm the provider is authorised, keep your documents safe, and make sure your family knows how to claim on the plan.