HM Treasury

3. Mr and Mrs C complains that HM Treasury didn’t act as it should have on concerns put to it in 2017 about Safe Hands Funeral Plans. They say HM Treasury was told Safe Hands was in breach of regulations that exempted funeral plan firms from Financial Conduct Authority (FCA) regulation if they followed certain rules around handling money but didn’t act or direct FCA to act either despite having the power to make FCA investigate. They also complain that HM Treasury delayed progressing new legislation.

4. In 2022 Safe Hands went into administration, and its 46,000 customers stand to lose most of the money they had paid for their funerals. Mr and Mrs C say that they lost their funeral plans and approximately £7,000 they paid. They say they are confident that had HM Treasury acted in 2017, most if not all customer losses could have been prevented. They say they have suffered severe stress, sleeplessness, depression and anxiety. They said events have been traumatic and they feel broken by the events. They also say Safe Hands customers may recover some of their loss through its liquidation process (Mr and Mrs C said between 9 and 15p in the pound); and other providers have offered them discounted funeral plans.

5. Mr and Mrs C want HM Treasury to compensate them (and the 46,000 others) for the consequences of its failure to act appropriately in 2017 equal to the loss in value of their funeral plans. They also seek an additional financial remedy in recognition of the impact of HM Treasury’s mistakes.

6. In 2017 and 2018 HM Treasury met a second funeral plan provider and a consumer group to discuss a report about the pre-paid funeral plan sector. They also raised concerns about Safe Hands (the provider).

7. In March 2022 the provider went into administration and people such as Mr and Mrs C who had paid for funeral plans with it lost their money.

8. In July 2022 new laws gave funeral providers’ customers more protection than before. Also, in 2022 Mr and Mrs C complained to HM Treasury that its response to concerns raised about the provider in 2017 and 2018 was inadequate. They were unhappy with HM Treasury’s reply and complained to us.

10. Before we decide if we should conduct a detailed investigation of a complaint, we look at whether there are signs the organisation, in this case HM Treasury, has got something wrong. We do this by comparing what should have happened with what did happen. We have done that and not found indications that something has gone wrong.

11. The FCA is an independent regulator, accountable to HM Treasury and Parliament. The Ombudsman can’t investigate FCA’s actions but can consider the administrative actions of HM Treasury in its oversight role.

12. Mr and Mrs C complained that HM Treasury didn’t act as it should have on concerns put to it in 2017 and 2018 about the provider.

13. Under the ‘Financial Services Act 2012’ the FCA must carry out an investigation where it appears to it that ‘events have occurred in relation to a regulated person (or collective investment scheme) which indicated a significant failure to secure appropriate consumer protection…and those events might not have occurred, or the failure or adverse effect might have been reduced, but for a serious failure in the system…for the regulation of authorised persons and regulated activities’. HM Treasury could if it considered that the conditions were met require the FCA to investigate.

14. However, until 2022 a funeral plan provider was exempt from the requirement to be authorised by the FCA if it undertook that sums paid by the customer under the contract would be held on trust for the purpose of providing the funeral, and that the trust met other requirements. In relation to this complaint, it meant the provider was exempt from regulation by the FCA.

15. In November 2022 HM Treasury replied to a complaint from Mr and Mrs C. It said it had no investigatory or enforcement powers of its own. It said it had acted on general concerns about the funeral plan market in the report and ‘responded quickly to bring the sector into regulation. However, the process…typically takes a number of years’. It said that in 2017 and 2018 HM Treasury staff had said concerns about the provider should be reported to the FCA.

16. We have seen evidence to indicate HM Treasury passed on concerns it received about the provider to FCA in 2017/18. Also, that FCA considered those matters. HM Treasury told us the 2017 report had highlighted concerns about lack of clarity for consumers in relation to funeral plans; high pressure sales tactics; poor transparency around customer payments, and lack of access to the Financial Services Compensation Scheme or Financial Ombudsman Service. The publication of that report had led to the meeting at which HM Treasury had told the consumer group to refer its concerns to the FCA. As far as directing the FCA to carry out an inquiry was concerned, HM Treasury said none of the 2017 and 2018 concerns related to a regulated activity given the provider was exempt from FCA regulation. The FCA also replied to Mr and Mrs C’s complaint to confirm that the provider in question was exempt from FCA regulation, and set out why that meant that its activities were outside the FCA’s jurisdiction.

17. HM Treasury also told us about indirect oversight funeral plan providers would have been subject to by FCA in 2017/18. It made the point that even funeral plan providers backed by a trust, which were exempt from FCA regulation, were subject to indirect FCA oversight and other safeguards. This included that the trust fund manager had to be authorised by the FCA and so subject to rules and supervision; trustees had a duty to act in the beneficiaries' best interests; and actuaries assessed the value of assets and liabilities. As well, about 95% of providers were self-regulated by the Funeral Planning Authority (FPA) voluntary code. The code included that providers ensure ‘funds are protected by being held in trust, are regularly audited, regularly reviewed by an actuary and are only invested by independent fund managers authorised’. The provider in this complaint had become a registered member of the FPA in July 2019, which suggested that the FPA had considered it met the requirements of the code.

18. Our Principles of Good Administration include ‘Getting it right’, which in turn includes that public bodies must comply with the law, and act according to their statutory powers and duties and any other rules governing the service they provide. We are satisfied that HM Treasury didn’t have the legal power to order FCA to investigate the provider because it was exempt from regulation under the then legal framework. HM Treasury acted appropriately by referring the concerns about the provider to FCA. So, we see no indication of maladministration in how HM Treasury acted.

19. Mr and Mrs C complained HM Treasury delayed progressing new legislation and about how it managed that period. More generally HM Treasury said the financial services sector was always evolving, and government may assess ‘whether new or existing activities need to be regulated. After the 2017/18 meetings, HM Treasury did decide to bring all funeral plan providers into regulation. It considered responses and evidence collated through a policy making process: a July 2018 – Call for Evidence ‘to ensure that the government understands the market and to gather further evidence’ that included meetings with providers; a June 2019 – Consultation on policy proposals and draft impact assessment on the proposed regulatory framework, to ensure ‘regulation is necessary, proportionate, and effective’; and a March 2020 – Consultation response and updated impact assessment – a summary of the feedback the government received and whether/how it was amending its approach.

20. HM Treasury said it had to include a transition period, to allow the FCA to design, consult on and implement a new regulatory framework. That would allow funeral plan providers to apply for authorisation and for firms who chose not to apply for FCA authorisation, or were unsuccessful in their application, to transfer their plans. HM Treasury’s consultation had outlined the incentives for other providers to take on contracts that needed to be transferred: to increase market share and to protect the reputation of their industry. HM Treasury had acknowledged that bringing a previously unregulated sector into regulation created a possibility some providers were not able to meet the threshold for authorisation.

21. From January 2021 Parliament considered HM Treasury’s proposed legislation, and from March 2021 the FCA had shared its own plans and consulted on how it planned to regulate. In July 2021 the FCA published its statement on ‘what the final rules for the sector will look like’ and then allowed firms to apply for authorisation. In July 2022 the legislation came fully into effect. HM Treasury said the process had been delayed by COVID-19 and other pressures on parliamentary time.

22. As we have set out, HM Treasury arranged and had to consider responses to consultations. ‘Getting it Right’ says public bodies should plan carefully when introducing new policies and procedures; and decision making should take account of all relevant considerations. We have seen HM Treasury acknowledged that the transition period was necessary but had the potential for consumer harm if the period was too long. Its actions set out above seem reasonable and to have progressed in a timely way given the steps needed while FCA communications included efforts to minimise risks. So, we see no indication of maladministration in how HM Treasury handled the process.

23. We realise Mr and Mrs C will be disappointed and frustrated by the position they are left in, but hope they find the explanation helpful.

1. We have carefully considered Mr and Mrs C’s complaint about HM Treasury. We have seen no indication that anything went seriously wrong. We think HM Treasury acted appropriately on the concerns put to it.

2. We realise the circumstances in the complaint were upsetting for Mr and Mrs C as they had invested and lost a significant sum and so this outcome will be disappointing and frustrating. We are sorry for that.