The watchdog says bringing funeral plans under its regulatory umbrella will enhance consumer protection.

The new rules aim to ensure high standards in the market and firms must ensure that plans are “sold fairly, perform as expected and provide value for money.”

The FCA has warned consumers that funeral plans sold before 29 July 2022 will not be regulated or covered by compensation schemes.

The new rules from July 2022 will mean:

• The FCA will ban funeral instalment plans that do not guarantee a funeral will take place (after a moratorium period) 
• Cold calling will be banned and new standards on advertising will be implemented  
• Commission payments to intermediaries will be banned to ensure products represent "fair value"
• Those selling funeral plans will be subject to full checks on their fitness to operate to improve governance standards and oversight

Firms that are not authorised or do not become appointed representatives by 29 July 2022 will have to cease trading in relation to funeral plans before FCA regulation takes effect.

From 29 July 2022 it will be a criminal offence for plan providers to carry out funeral plan contracts without authorisation. 

Sheldon Mills, executive director, Consumers and Competition at the FCA, said: “Funeral plans should provide customers with comfort and certainty that their affairs are in order.

“Our new rules for the sector will drive up standards and ensure that when consumers buy a plan, they receive a product that matches their needs and expectations. 

“We are banning all commission payments to intermediaries to make sure products offer fair value, and, having seen the real harm cold calling can cause consumers, we’ll be banning it.

“As we take over the regulation for this market, we will be rigorously assessing firm’s fitness to operate. Firms must now plan for this new regulatory regime or prepare to leave the market in an orderly manner.”