1This section applies to a firm:

1. (1)

   entering as provider into a funeral plan contract; and

2. (2)

   carrying out a funeral plan contract as provider in relation to a new funeral plan contact.

1In relation to a subsisting funeral plan:

1. (1)

   under which the funeral plan provider undertakes to secure that sums paid by the customer under the contract will be held on trust for the purpose of providing the funeral; and

2. (2)

   where the trust instrument or such contract have been substantively amended on or after 2 March 2021 so that their terms (post-amendment) meet any of the applicable requirements in this section or the funeral plan resolution rules in FPCOB 16,

a firm carrying out that contract as provider must, to the extent within its powers, comply with this section from 29 July 2022 or the point in time that the amendment is made if later.

1The rules and guidance in this section must be construed in accordance with the primary purpose.

1The primary purpose is to ensure that funeral plan contracts are underpinned by robust trust or insurance arrangements that will enable the provision, at the relevant time, of funerals in accordance with the terms of the funeral plan contracts.

1In relation to each funeral plan contract, a funeral plan provider must either:

1. (1)

   purchase, or arrange the purchase of, a contract of insurance from an authorised insurer on the life of the covered individual that is sufficient for the purpose of providing the agreed funeral; or

2. (2)

   arrange for such proportion of sums paid by the customer under the funeral plan contract that is sufficient for the purpose of providing the agreed funeral to be held on trust,

as soon as reasonably practicable after receipt of monies from the customer, appointed representative or funeral plan intermediary.

2For the purpose of FPCOB 3.1.6R(1), the contract of insurance must contain terms that will deliver the following objectives:

1. (1)

   clearly identifies the policyholder under the contract of insurance;

2. (2)

   restricts the circumstances in which the insurer can make a payment under the contract to:

   1. (a)

      payments made to the funeral plan provider or funeral services provider for the purpose of delivering a covered individual’s funeral, which must only be paid after receipt and verification of the covered individual’s death certificate, or Certificate for Burial or Cremation (GR021 in Northern Ireland) where a death certificate is not available, in accordance with FPCOB 3.1.11R(2);

   2. (b)

      providing a customer refund; or

   3. (c)

      on the failure of the funeral plan provider or if it is in default, payments to a customer or covered individual or (on the covered individual’s death) to their next of kin or in accordance with a determination of the FSCS;

3. (3)

   will deliver all applicable outcomes in the funeral plan resolution rules;

4. (4)

   the contract of insurance will not terminate upon failure of the funeral plan provider;

5. (5)

   requires the insurer to co-operate with the FCA, the FSCS and any insolvency practitioner appointed, or proposed to be appointed, to the funeral plan provider in seeking to achieve the primary purpose on a failure or potential failure of the funeral plan provider; and

6. (6)

   where the whole, or relevant part, of the business of the funeral plan provider has been transferred to a new funeral plan provider, the insurer may substitute the new provider in place of the original provider.

2For the purposes of FPCOB 3.1.6R(2), the trust must be established by a written instrument which contains terms that will deliver the following objectives:

1. (1)

   that the assets are held on trust to make the payments set out in (3), and, when there are no more payments due or potentially due under that paragraph, upon trust for the funeral plan provider;

2. (2)

   that the assets held on trust are kept segregated from any assets belonging to the funeral plan provider;

3. (3)

   that the trustees are required to make the following payments (and are not permitted to make any other payments) out of the trust:

   1. (a)

      payments made to the funeral plan provider or funeral services provider for the purpose of delivering a covered individual’s funeral, which must only be paid after receipt and verification of the covered individual’s death certificate, or Certificate for Burial or Cremation (GR021 in Northern Ireland) where a death certificate is not available, in accordance with FPCOB 3.1.11R(2);

   2. (b)

      essential payments for the operation of the trust (arising out of obligations owed by either the trustees or the funeral plan provider), limited to taxes, trustee fees, actuary fees, custodian fees, legal fees, trust administration fees, audit fees, investment management fees (including transaction fees), trustee liability insurance, and costs of insurance arrangements to provide a funeral on death within the instalment term;

   3. (c)

      in the event of the insolvency of the funeral plan provider, payments to meet a claim by an insolvency practitioner against the assets held on trust, in priority to all other claims against those assets, to meet their costs properly attributable to:

      1. (i)

         causing the provider to continue providing or arranging funerals under existing funeral plan contracts;

      2. (ii)

         effecting a transfer of those contracts to another funeral plan provider; or

      3. (iii)

         making payments under (3)(e);

   4. (d)

      providing a customer refund;

   5. (e)

      on the failure of the funeral plan provider or if it is in default:

      1. (i)

         except where arrangements to secure continuity (whether or not involving the FSCS) of funeral plan contracts have been implemented:

         1. (A)

            payments to each customer or covered individual or (on the covered individual’s death) to their next of kin of the amount that the trustees consider is a reasonable estimate of the cost, at the time of the failure or declaration of default, of purchasing a replacement funeral plan contract on terms corresponding, in all material respects, to the original funeral plan contract; or

         2. (B)

            if the trust assets are insufficient to pay each customer or covered individual the full amount required by (A), a proportional amount of the trust assets based on that full amount required by (A); or

      2. (ii)

         payments in accordance with a determination of the FSCS;

   6. (f)

      on a transfer by the funeral plan provider of all or part of its funeral plan business to another funeral plan provider, payment to the trustees of another trust set up by the other provider or to purchase insurance contracts, as directed by the funeral plan provider, provided that an actuary, who is a fellow of the Institute and Faculty of Actuaries, has certified the sufficiency of the arrangements for the purpose of providing the agreed funerals under the funeral plan contracts transferred and any contracts which are not transferred;

   7. (g)

      surpluses to a funeral plan provider, where FPCOB 3.2.12R applies;

4. (4)

   will deliver all applicable outcomes in the funeral plan resolution rules;

5. (5)

   more than half of the trustees must be unconnected with the funeral plan provider;

6. (6)

   the trustees must appoint, or have appointed, an independent fund manager who is an authorised person who has permission to carry on an activity of the kind specified by article 37 of the Regulated Activities Order, and who is a person that is unconnected with the funeral plan provider, to manage the trust assets;

7. (7)

   annual accounts in respect of the assets and liabilities of the trust must be prepared, and audited by a person who is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006;

8. (8)

   the trustees must send a copy of the annual accounts to the funeral plan provider to facilitate its financial reporting, and must otherwise co-operate with, and provide information to, the funeral plan provider to facilitate compliance with its obligations under the rules (as amended from time to time);

9. (9)

   the trustees must co-operate with the FCA, the FSCS and any insolvency practitioner appointed, or proposed to be appointed, to the funeral plan provider in seeking to achieve the primary purpose on a failure or potential failure of the funeral plan provider;

10. (10)

    that the written instrument can and must be amended if and to the extent that the funeral plan provider is required to seek an amendment by the FCA (by a rule or requirement);

11. (11)

    where the whole of the business of the funeral plan provider has been transferred to another funeral plan provider, the trust may make provision for the substitution of the new provider in place of the original provider;

12. (12)

    an acknowledgement by the trustee that the funeral plan provider has been appointed by customers as an agent with a duty to enforce their rights under the trust (see FPCOB 16.1.5(3)(d)).

Note: Guidance on the preparation of a trust deed to meet these objectives is in FPCOB 3 Annex 1.

2For the purposes of FPCOB 3.1.9R(5) and FPCOB 3.1.9R(6), a person is unconnected with the funeral plan provider if that person is a person other than:

1. (1)

   the funeral plan provider;

2. (2)

   a member of the same group as the funeral plan provider;

3. (3)

   a director, other officer or employee of the funeral plan provider, or of any member of the same group as the funeral plan provider;

4. (4)

   a partner of the funeral plan provider;

5. (5)

   a close relative of a person falling within sub-paragraphs (1), (3) or (4);

6. (6)

   an agent of any person falling within sub-paragraphs (1) to (5); or

7. (7)

   any other person whose business or domestic relationship with the funeral plan provider (or other person in sub-paragraphs (1) to (6)) might reasonably be expected to give rise to a community of interest between them and the funeral plan provider which may involve a conflict of interest in dealings with third parties.

2A funeral plan provider must:

1. (1)

   make arrangements to safeguard monies it has received:

   1. (a)

      from a customer, appointed representative, or funeral plan intermediary under a funeral plan contract, and which are sufficient for the purpose of providing the agreed funeral, between receipt and applying the monies in accordance with FPCOB 3.1.6R;

   2. (b)

      pursuant to a contract of insurance prior to delivering a covered individual’s funeral, providing a customer refund, or pursuant to FPCOB 3.1.8R(2)(c); or

   3. (c)

      from a trust prior to delivering a covered individual’s funeral, providing a customer refund, or pursuant to FPCOB 3.1.9R(3)(e),

   to ensure that such monies are not at any stage, including on its failure, assets of the funeral plan provider;

   1. (2)

      provide to an insurer or trustee, as applicable, a copy of the covered individual’s death certificate, or Certificate for Burial or Cremation (GR021in Northern Ireland) where a death certificate is not available, prior to, or at the time of, requesting money under the terms of an applicable contract of insurance or in accordance with the terms of a trust for the purpose of delivering or arranging a funeral; and

   2. (3)

      pay monies received from an insurer or a trust for the funeral of a covered individual to the funeral services provider that has agreed to provide a funeral for the covered individual as soon as reasonably practicable following receipt.

1. (1)

   1A firm must ensure that the systems and controls, including procedures and arrangements, used to comply with the requirements in this chapter are adequate, effective and appropriate for the scale and nature of its business.

2. (2)

   Sub-paragraph (1) applies in particular to systems and controls concerning:

   1. (a)

      the adequacy of the trust and insurance arrangements that a firm must put in place in accordance with FPCOB 3.1.6R;

   2. (b)

      whether a proposed price for a funeral plan contract is likely to lead to, as applicable, an under-funded trust arrangement or an insufficient insured sum to provide the funeral contracted for; and

   3. (c)

      the price of the funeral plan contract, bearing in mind the cost of the funeral to the firm.

1A firm’s systems and controls must be developed to:

1. (1)

   factor in the risk of inflation when considering pricing decisions; and

2. (2)

   if applicable, factor in the volatility of trust assets.

1This section applies to a funeral plan provider in relation to funeral plan contracts (including subsisting funeral plans) under which sums paid by the customer are held on trust for the purpose of providing the funeral.

1A funeral plan provider must arrange for a solvency assessment report to be produced at least once every 12 months by an actuary who is a fellow of the Institute and Faculty of Actuaries.

1The solvency assessment report must:

1. (1)

   within 12 months of the:

   1. (a)

      last report obtained by the funeral plan provider; or

   2. (b)

      trust being established,

   determine, calculate and verify the assets and liabilities of the trust by applying a best estimate basis;

2. (2)

   include, as a minimum, the following information:

   1. (a)

      the actuarial valuation date;

   2. (b)

      an actuarial valuation of the assets and liabilities of the trust;

   3. (c)

      the solvency level of the trust (ratio of trust assets over trust liabilities as a percentage) on a best estimate basis;

   4. (d)

      the assumptions adopted with respect to the valuation of the trust assets and trust liabilities;

   5. (e)

      the number of undrawn or live plans categorised by payment method;

   6. (f)

      the total plan values in relation to undrawn or live plans categorised by payment method;

   7. (g)

      the average plan value categorised by payment method;

   8. (h)

      the investment of trust assets at fair value by asset class at the actuarial valuation date;

   9. (i)

      the investment of trust assets at fair value by investment manager at the actuarial valuation date;

   10. (j)

       the level of all monies deducted from the trust over the period and identification of how the deductions have been spent; and

   11. (k)

       the details of any liability sub-contracted to funeral services providers;

3. (3)

   be produced taking account of any relevant actuarial professional and technical standards, guidance and codes;

4. (4)

   be published by the funeral plan provider on its website within 30 days of the date on which the actuary completes the valuation and, in any case, no later than 6 weeks from the date an actuary is appointed to produce a solvency assessment report; and

5. (5)

   be made available free of charge on request.

1. (1)

   1For the purposes of FPCOB 3.2.3R(2)(b), the liabilities of the trust should be assessed against FPCOB 3.1.6R(2).

2. (2)

   For the purposes of FPCOB 3.2.3R(2)(e), (f) and (g), the payment method should be categorised into:

   1. (i)

      single payments;

   2. (ii)

      instalment payments fully paid; and

   3. (iii)

      instalment payments not fully paid.

3. (3)

   For the purposes of FPCOB 3.2.3R(2)(k), details of any liability sub-contracted to funeral services providers may include inflation.

1. (1)

   1A funeral plan provider must send a copy of the solvency assessment report to the FCA within 7 days of it being received by the funeral plan provider.

2. (2)

   If the solvency assessment report concludes that the assets of the trust are not sufficient to cover the liabilities of the trust, the funeral plan provider must provide a notification of that fact with the solvency assessment report at the same time as providing a copy of the solvency assessment report, in accordance with SUP 15.7.1R.

1If a solvency assessment report concludes that the assets of the trust are not sufficient to cover the liabilities of the trust, a funeral plan provider must prepare a remediation plan that is approved by an actuary who is a fellow of the Institute and Faculty of Actuaries.

1The funeral plan provider must ensure the remediation plan sets out the following:

1. (1)

   how the deficit in the trust that has been identified by the solvency assessment report will be remedied before the next annual solvency assessment report is due; and

2. (2)

   any assumptions that have been made in relation to any of the remedial steps or actions that the funeral plan provider intends to implement to remedy the deficit in the trust.

1The funeral plan provider must submit the remediation plan to the FCA for review, in accordance with SUP 15.7.1R, as soon as possible and no later than 30 days from the submission date of the relevant solvency assessment report to the FCA.

2The funeral plan provider must begin to implement the remediation plan:

1. (1)

   as soon as possible and in any event within 30 days of submitting it to the FCA;

2. (2)

   in accordance with the terms of the remediation plan (or any amendments agreed with the FCA or imposed by the FCA by requirement).

1A funeral plan provider that is in the process of implementing a remediation plan must:

1. (1)

   notify the FCA, in accordance with SUP 15.7.1R, as soon as it suspects that it will not be able to fully implement the remediation plan in accordance with its terms; and

2. (2)

   notify the FCA, in accordance with SUP 15.7.1R, immediately if the solvency level of the trust remains below 100% following the expiration of the remediation plan, which is the time at which the next solvency assessment report is due.

1. (1)

   1If, following the expiration of the remediation plan, the assets of the trust remain insufficient to cover the liabilities of the trust, the funeral plan provider must remedy any shortfall using its own resources so that the solvency level of the trust is returned to 100% or more (when assessed on a best estimate basis).

2. (2)

   The obligation in (1) must be fulfilled as soon as practicable and in any case within 3 months of the date the expiration of the remediation plan.

3. (3)

   The funeral plan provider must notify the FCA, in accordance with SUP 15.7.1R, when the shortfall has been remedied.

1A funeral plan provider must not withdraw any surpluses from the trust except and only to the extent that:

1. (1)

   the solvency level of the trust is above 110% when calculated on a best estimate basis; and

2. (2)

   the withdrawal has been approved by an actuary who is a fellow of the Institute and Faculty of Actuaries.

1A funeral plan provider must send a copy of the annual accounts of the trust to the FCA as part of its next financial report.