I thank Mr Speaker for granting this important Adjournment debate. I know that my constituents and other hon. Members’ constituents who have been affected will be grateful that the situation has been recognised with due seriousness.
On the first day of the Easter recess, my constituent Patrick Hughes called my office following the collapse of Safe Hands Funeral Plans, which had gone into administration the week before. Quite understandably, he was extremely anxious about what would happen next. Some years ago, Mr Hughes had bought a policy or plan with Safe Hands at an initial cost of about £6,300. It was a significant investment, but it was worth it: he was paying for peace of mind that his family would not have to worry about finding the money for a funeral when the time came.
Funerals do not come cheap, but we all want to be able to give our loved ones the best send-off we can. A key attraction for Mr Hughes and for so many like him was the security that they were being offered. “Nothing can go wrong,” they were assured. “This is a smart investment: your plan is guaranteed and your family will be grateful that they won’t have to worry about it at their time of grieving.”
To date, Mr Hughes has been contacted exactly once since the business went into administration: with the initial letter informing him of the collapse. Like the many thousands of policyholders in the same boat, Mr Hughes tried to make contact with Safe Hands or its administrators to get some answers about what would happen next. His letters went unanswered. The phone lines would not connect, or the phone would just ring out. Panic began to set in.
Customers were told that the company was
“uncertain that the funeral plans will be able to be fulfilled” and that they should consider their plans
“terminated with immediate effect”.
People were realising that it was becoming very likely that their life savings had been lost. Safe Hands was not regulated by the Financial Conduct Authority. Anecdotally, I understand that it was regarded in the wider funeral industry as a cowboy—a reputation that did not reach its customers in time for them to reconsider their investments.
The thing is that such plans, if provided by reputable companies and regulated properly, could be immensely beneficial. They really could give some peace of mind. That is why, along with the sector and colleagues, I wholeheartedly welcome the Government’s plans to bring funeral planning services under the remit of the Financial Conduct Authority this July. The plans, which include assessments of providers, fund protection measures, stricter advertising rules and bans on cold calling, will hopefully protect future customers from falling victim to the scams of unscrupulous companies such as Safe Hands. I appreciate the letter that the FCA sent me in advance of this debate, setting out how the regulatory reforms will work; I look forward to taking up its offer of a meeting to discuss them in more detail.
I commend my hon. Friend for securing this debate. As an example of the kind of advertising that the company has been doing, it promised that customers’ money would be kept by an entirely separate and independent company. Is she aware that the trustees set up a company called SHFT Properties Ltd and that every single person who has ever been a director of that company was also a director of Safe Hands Plans Ltd? Does she share my frustration that directors of companies that repeatedly tell such blatant lies to con their customers are allowed to carry on as directors of other companies to this very day despite the chaos left behind in the wreckage, as has happened with Safe Hands Funeral Plans?
I thank my hon. Friend for his intervention—and I shall have more specific thanks to give him a little later in my speech. I completely agree with the points that he has made. I know that the Government intend to introduce legislation relating to economic crime and impropriety during the current Session, and I hope the Minister can confirm that it is something they are seriously considering.
I was particularly happy to note the FCA’s clear focus on consumer protections, and I fully agree with their approach in wishing to ensure that customers pay a fair price, that the plan meets their needs, that the money is looked after responsibly, and that they have all the information they need in order to make an informed decision. Unfortunately, however, that announcement is just too little, too late for many of Safe Hands’ customers.
Let me provide some context by explaining the way in which Safe Hands worked. Customers’ money was put into a trust and then reinvested. These funds are supposed to protect customer investments, and, indeed, that is how the plan was sold to my constituent Mr Hughes. The trust should have been overseen by independent trustees whose job is to make sure that funds are not misappropriated, and are ring-fenced from the funeral provider’s business assets. When Safe Hands suddenly left the market after withdrawing its application to be an approved seller under the upcoming FCA rules, administrators found a significant shortfall between the value of this trust and the cost of the funeral plans that it would need to finance.
Apparently, what the administrators found was that the trust’s assets had been wildly overvalued. What was even more concerning was that most of the assets were actually owned by third parties, as was mentioned by my hon. Friend Peter Grant. Reports indicate that over £60 million of the trust’s reported £64 million valued assets were high-risk investments based offshore. If that is true, we are talking about fraudulent misappropriation of the trust’s assets. I will refrain from speculating on who might have benefited from all of this, which can only be described as a scam.
The hon. Lady has made an important point. The constituents of many of our colleagues will be affected by this I have been contacted by a Mrs Hall of Knaresborough, who has been caught up in it. Does the hon. Lady agree that it is critical for funds that are supposedly secure to be managed in an effective way, and that there should be regulatory consumer protections to ensure that those who are looking for certainty at what will be a very difficult time for their families can have that certainty?
As the hon. Gentleman says, many constituents of Members have been affected, throughout the UK. It is very important for people to have that certainty, because uncertainty is an extra worry for them.
It is likely that a number of similar smaller funeral plan providers will soon exit the market before regulatory measures become effective. They may be unwilling, or even unable, to meet the requirements for regulatory approval, and that has the potential to leave customers of those companies in the same position as the customers who went with Safe Hands, with no plans and no guarantees about retrieving the money that they have put in. I know that the FCA is also looking at this issue pre-emptively, with the aim of minimising risk to people who have already invested in plans with such firms. Hopefully the work that it is already undertaking will mitigate any potential further harm to vulnerable consumers, but for customers of prepaid funeral plan companies that will shortly be exiting the market, the proof of the pudding will be in the eating.
I congratulate the hon. Member on securing a debate that affects so many of our constituents. As she has said, there were plans in the offing for the FCA to have a role with companies such as Safe Hands. Does she share my concern that more was not done to warn people, given that this had already been flagged up? It seems to me that not enough was done in that interim period, and, as she has said, we could see even more people affected by other companies acting in a similar way.
I entirely agree. As I said earlier, it was a case of too little, too late. More people need to be aware of these plans and what they may mean. I look forward to the FCA’s introducing that regulation at the end of July, which is not too far in the future.
For customers of Safe Hands, there is the potential for some support in the form of Dignity plc, one of the UK’s largest providers of plans. Dignity has put a plan to the administrators which would allow them to step up and cover some of the shortfall left by Safe Hands, providing immediate support where it is needed most urgently, and planning to work with other customers and their families in the longer term to find solutions that will not leave customers with nothing in place. Dignity believes that, because of its business model as a plan provider with a wide network of funeral directors, it is uniquely placed to offer that support. It has already fulfilled in full the funeral plans of all Safe Hands customers in the four weeks following the collapse of the firm.
Dignity is also already preparing for the regulation requirements that will come into effect, but even as of last night, at my last check, the information offered by the administrators through the frequently asked questions page on the Safe Hands website was insufficiently clear or reassuring. They make numerous references to Dignity’s offerings, but reiterate that customers should consider their plans cancelled with no guarantees around how much money customers will see returned, if any at all. There is a lot of “options being explored”, and “updates will be provided”, but a disappointing lack of commitment.
My constituent, Mr Hughes, really only has one immediate plea, and that is for some clarity and some willingness to proactively engage with customers. Maybe it is impossible for administrators to provide reassurances in the true sense of the word—maybe the financial realities of the situation just will not allow for that—but how difficult can it really be to ensure that the victims of this unfortunate situation are kept abreast of updates and to let them know periodically how the work is developing and that they are not being overlooked or forgotten? Mr Hughes has explained that there is so much information, so much speculating and so many customers shouting in the hope of being heard that he struggles to cut through the noise. What he needs is reliable, clear information to enable him to understand what has happened, why it has happened, and what might happen next, not only for him but for his family and his children. He worries about the worst happening while all this remains unresolved, and about the additional distress that this uncertainty will cause.
When people decide to invest in a prepaid funeral plan, it is often on the back of an event in their life that has made them come to terms with their own mortality. Maybe they are just reaching old age, maybe they have had a worrying medical diagnosis or maybe they have recently lost a loved one. That means that they are emotionally vulnerable and that they need to be sure that their investment is protected, particularly when the majority of those that choose a prepaid plan are doing so because their estate might not leave much more for their children or family than the cost of a funeral, and perhaps not even cover that.
We are in a cost of living crisis. At a time when people are struggling with the stress of paying their energy bills, putting food on the table or meeting their general living costs, it is unthinkable that, resulting from the collapse of Safe Hands, some of those people will face the added stress of trying to finance the funeral of someone they care about—a funeral that, as far as they were concerned, was already paid for, either partially or, in many cases, in full. I understand that any business needs to turn a profit. That is the nature of the game, but in this emotionally charged market based on one of the few guarantees we have in life—death—sensitivity is required. To prey on that customer base is absolutely disgusting.
While Safe Hands certainly does not represent the standards of the industry as a whole, we know that, intentionally or not, other firms have put their customers’ money and funeral plans at risk by not seeking approval ahead of the regulations. For reasons I hope Dignity understands, I am cautious about enthusiastically throwing my support behind any company in the currently unregulated pre-paid sector at the moment, but I would like to thank Dignity for proactively reaching out and sharing some information with me ahead of this debate. I would also like to thank the all-party parliamentary group for funerals and bereavement and its chair, Sir John Hayes. I know that it continues to engage with the Treasury on this matter to try to ensure that dignity is maintained. I also want to thank Peter Grant, who organised the cross-party letter to the Secretary of State for Business, Energy and Industrial Strategy last month. This provided a co-ordinated display of the feelings held by constituents.
I hope the Minister will be in a position to provide the assurances that Safe Hands and its administrators have been unable to provide, and I urge him and his colleagues in the Treasury and across Whitehall to find a way to ensure that these people who have lost hard-earned money do not miss out on a dignified goodbye when that time sadly comes, for the sake of Mr Hughes and the 46,000 others like him, their families and friends and the people who love them most in the world.
Motion lapsed (
Motion made, and Question proposed, That this House do now adjourn.—(Miss Dines.)
I apologise to the Minister, who will not have anticipated my bobbing up for two minutes.
I commend Margaret Ferrier for securing the debate. Like her, I have been contacted by numerous constituents who had Safe Hands policies and are in deep distress. Some of them have relatives who are very near death and are unsure what will happen to them. I welcome Dignity’s proactive approach, but I remain deeply concerned that many more firms in a similar situation will withdraw from the market before FCA regulation takes full effect. I am not yet clear that Dignity has the capacity to cope with that level of demand, or that the industry as a whole has the willpower to address this issue.
This reminds me, to some extent, of the Farepak scandal about 10 years ago, although those sums were relatively small compared with the sums invested in funeral plans. I represent one of the most deprived communities in the United Kingdom, and the cost of a funeral can be one of the largest unexpected bills faced by families in my constituency. Many of them will have invested in these plans, not just for the emotional security but for the financial security, too. The risk is that, as an alternative, they will have to resort to the very dangerous lending practices of loan sharks and doorstep lenders.
I urge the Minister to explain what more he can do, and to accelerate the no-interest loan pilot, on which I know he is working. The perfect vehicle for dealing with these large, unexpected costs is to allow the state to provide an interim solution to give people more financial stability. These costs are a genuine worry for dozens, if not hundreds, of people in my constituency, and I join the hon. Member for Rutherglen and Hamilton West in looking forward to hearing what the Minister has to say.
I thank Margaret Ferrier for securing this important and timely debate on an incredibly emotive subject. I thank colleagues on both sides of the House for their contributions, including the hon. Members for Glenrothes (Peter Grant) and for Llanelli (Nia Griffith). I will specifically address the points raised by my hon. Friend Paul Maynard, and I thank my hon. Friend Andrew Jones for raising his constituent’s case.
I take this opportunity to remember our former colleague Sir David Amess. He was a friend to many of us here today, and he cared very much about helping people manage the financial impact of funerals. I thank hon. Members who have campaigned over the past few years in support of regulation. I recall conversations with Neil Gray, the former hon. Member for Airdrie and Shotts, who first tabled a private Member’s Bill to this effect in 2016.
Finally, I am grateful to hon. Members here today for the points they have raised. I think I will be able to address many of those points, and I will write to them on anything that I do not address.
As has been said, funerals are painful experiences, but they can also provide people with a degree of mental closure, because they help us to adjust to the reality of the loss of a loved one. We are all very much agreed that at such a moment mourners should be able to focus on their memories of their loved one and on their own emotions; no one should be consumed by money worries. Clearly, therefore, Safe Hands’ entering administration, as the hon. Lady accurately set out, is very distressing for its customers and their families. Obviously, she mentions eloquently the case of Mr Hughes and what he has experienced in recent weeks. Our thoughts should be with those who have recently lost someone close to them and now find themselves affected by Safe Hands’ failure. As has been mentioned, Dignity, one of the UK’s largest funeral plan providers, has stepped in to provide funerals on behalf of Safe Hands’ customers in the immediate period after the firm entered into administration. I echo the hon. Lady’s words in expressing gratitude that it has stepped up to the mark and agreed to do that for a further six months. I regret the fact that her constituent does not have clarity on exactly where that leaves him, but of course Safe Hands will be entering the administration process and that will need to be concluded before wider issues can be looked at. I met people from Dignity yesterday, along with my Treasury officials, and they reiterated their commitment for the next six months. It has been very welcome to see a funeral plan provider taking that responsibility for protecting the sector’s customers and upholding the industry’s reputation.
I had the privilege of meeting my right hon. Friend Sir John Hayes, and members of the all-party group and of the industry a few weeks ago to discuss what was happening with this difficult case. Although the Financial Conduct Authority does not yet regulate funeral plan providers, it is supporting the industry and administrators as they look to find a longer-term solution for Safe Hands’ customers. I am very hopeful that customers will not need to wait too much longer before they see further progress on this longer-term approach. However, I strongly believe that what has happened to Safe Hands is clear evidence of the pressing need for a better-regulated funeral plan market that will provide customers with the stability they need at such a difficult time and will allow us, as Members of Parliament with constituents who have been affected by Safe Hands’ demise, the reassurance and confidence that we can see them not worry in future.
Although the sector provides a valuable service, there is still some distance to travel when it comes to ensuring that all funeral plan customers are shielded from harm. Indeed, major reports and work carried out by the Treasury and the FCA revealed examples of consumer detriment in the sector. As a result, last year, we legislated to bring providers and intermediaries within the regulatory remit of the FCA. That change means that from
The Government recognise that the new regulation presents a major change for providers, which is why we introduced an 18-month transition period before the new rules came into effect. That has given businesses time to take the right steps to familiarise themselves with the new requirements and prepare to adopt them.
We of course recognise that it is paramount that we minimise any disruption to customers as a result of the changes, which is why the FCA has said that providers that decide not to or cannot obtain authorisation should transfer their plans to a provider that will operate under the new rules. Alternatively, businesses should wind down in an orderly way before the regulation comes into force.
On that note, Members may be aware that last month the Government made a supplementary statutory instrument that will make it easier for funeral plan providers that seek to exit the market to transfer their existing funeral plan to a regulated funeral plan provider. I discussed that change with Dignity yesterday, and it welcomed it. It should ease the process for the relatively small number of people who find themselves subject to a plan the provider of which will not go into regulation: they will be able to port their plan to one of the bigger industry providers.
When we bring a sector into regulation for the first time, there is clearly a possibility that some providers will be unable to meet the authorisation threshold. In addition, the process may reveal that some businesses are unable to deliver on promises they have made to their customers.
The Minister is understandably focusing on the new regulatory regime—I think he is aware of some of my concerns about the adequacy of the FCA as currently set up—but there should have been other regulation. Who should have been regulating the activities of the trust? Who should have prevented it from engaging in wildly speculative, insecure investments, directly against the promises that were made? Safe Hands Plans Ltd’s first two years of accounts contained demonstrably and obviously false statements, which were never picked up on by Companies House. Who should have been regulating that? Does the Minister accept that regardless of the changes to the regulation of funeral plan companies, there appear to have been serious regulatory failures elsewhere, again?
The hon. Gentleman makes his points somewhat speculatively, but expresses some valid specific concerns about the journey that Safe Hands went on. Other investigations cannot take place until the administration process is concluded. The driver for the regulations that we are to introduce was the fear among Members from all parties a few years ago. The important thing is to give reassurance going forward. There will be a day of reckoning for the directors of Safe Hands, who will have to account for what happened, but the administration process must happen first. I cannot say any more on that, but the hon. Gentleman’s relevant points are noted.
I must stress that an inability to meet the new standards of regulation—because of issues with conduct, business models or trust arrangements—does not mean that the regulation is at fault; rather, by bringing the sector into regulation, we expose unsustainable practices that, left unchecked, could ultimately worsen and impact more consumers. As the famous adage says, sunlight is the best disinfectant. In this instance, by regulating we will turn the spotlight on businesses that operate with unworkable models, and will prevent consumer harm.
My hon. Friend Paul Maynard asked about the low-interest loan scheme that we have been piloting with South Manchester Credit Union. I hope to visit Manchester in the week after next. My hon. Friend is absolutely right that there is a wider agenda in terms of affordable credit, and I am still very much committed to developing that instrument and making it widely available, alongside making other interventions in respect of credit unions that we can talk about when the financial services and markets Bill comes to the House shortly.
It is right that the Government act to protect consumers, many of whom will be elderly or vulnerable, with a robust, proportionate regulatory framework. In addition, a well-regulated market will promote effective competition and drive better long-term outcomes for consumers. As I have said, Safe Hands customers can be assured that they will be covered for at least another six months. I encourage other providers and market participants to take further action, as Dignity has done, to protect consumers of firms that will not become authorised.
I assure the House that the Government and the Financial Conduct Authority continue to work closely with each other and with the sector—I have mentioned those two meetings that I have personally held, and meetings that my officials have held, with industry representatives—to ensure that that shift to regulation is as smooth as possible. I take account of the several valid points raised this afternoon. We all have a moral obligation to ensure that funeral plan customers and their loved ones receive the certainty that they need and deserve.
Question put and agreed to.