Category: Other personal lines · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-05
A funeral plan is a pre-paid UK contract under which a provider agrees, in exchange for a single payment or instalments, to deliver specified funeral services on the planholder’s death, with the contract sum held in trust or in an insurance contract.
Category: Other retail Also known as: pre-paid funeral plan, funeral pre-payment plan First codified: Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2021 — bringing pre-paid funeral plans within FCA scope from 29 July 2022 Related legislation: Financial Services and Markets Act 2000; FCA Handbook (FUNE); Consumer Rights Act 2015 Apex Wiki link: /wiki/funeral-plan/
A funeral plan is a contract under which a planholder pays a provider, either as a single lump sum or through instalments, in exchange for the provider’s promise to deliver specified funeral services on the planholder’s death [1]. Plans typically cover the funeral director’s fees, the coffin, hearse and transport, the conducting funeral director, and a contribution to third-party costs (disbursements) such as cremation fees, doctors’ fees and minister fees.
The defining feature of a funeral plan is price certainty. The planholder pays today’s prices for services to be delivered at an unknown future date. Funds received from the planholder must be ring-fenced in a trust or in a whole-of-life insurance policy assigned to the provider, so that they remain available to fund the funeral when the time comes [2].
Funeral plans were sold in the United Kingdom largely unregulated until 29 July 2022, when the activity of entering into and carrying out a funeral plan contract as provider was brought within the Financial Conduct Authority’s remit by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2021 [3]. From that date, only firms authorised by the FCA may sell or administer funeral plans, and the FCA’s dedicated Funeral Plan sourcebook (FUNE) sets the conduct rules.
A funeral plan is distinct from a whole-of-life or over-50s life insurance policy that pays a cash lump sum on death: the funeral plan delivers services in kind, while life policies pay money to the estate, which the family may or may not use towards funeral costs.
The current regulatory regime sits in two layers. First, the activity of entering into or carrying out a funeral plan contract as provider is a regulated activity under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), articles 59 and 59A, as inserted by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2021 [3]. From 29 July 2022 a person carrying on that activity by way of business in the United Kingdom must be authorised by the FCA under section 19 of the Financial Services and Markets Act 2000 [4]. Acting without authorisation is a criminal offence and renders the contract unenforceable against the planholder.
Second, the FCA’s conduct requirements for funeral plan providers and intermediaries are set out in the Funeral Plans sourcebook (FUNE) in the FCA Handbook [5]. FUNE requires providers to hold plan monies in trust or in an insurance contract, to operate to a defined fair value standard, to provide a Plan Summary Document at the point of sale, and to comply with the Consumer Duty (PRIN 2A) [6]. Cold calling for funeral plans is prohibited, and commission-based selling to consumers is restricted.
Before 29 July 2022 the sector was governed by a voluntary code overseen by the Funeral Planning Authority (FPA), an industry self-regulator. The FPA approved providers against a code of practice, but the regime was not statutory. The transition to FCA regulation followed HM Treasury’s 2018 call for evidence and the 2019 consultation that identified consumer harm in the unregulated market, including poor sales practices, mis-selling and provider insolvencies leading to loss of consumer funds.
The Financial Services Compensation Scheme covers FCA-regulated funeral plan contracts entered into on or after 29 July 2022, with protection where an authorised provider fails [7]. Funeral plan complaints fall within the jurisdiction of the Financial Ombudsman Service on the same date.
A consumer typically takes out a funeral plan either directly with a provider, through an authorised intermediary, or via a funeral director who is authorised as an agent of the provider. The Plan Summary Document sets out exactly what is and is not included, the cost, the payment terms, and the cancellation rights.
Payment may be by single lump sum or by instalments over a defined term, commonly five or ten years. If the planholder dies before instalments are complete, the contract’s mid-term death provisions determine what happens: many plans require the balance to be paid by the estate, while others provide the funeral with no further payment after a minimum period.
When the planholder dies, the family or executor contacts the provider, who arranges the funeral with a participating funeral director. The provider draws funds from the plan trust or the assigned insurance policy to pay the funeral director. The family typically receives a refund or top-up where the disbursements differ from the allowance built into the plan.
Plans are portable: most providers allow the funeral to be carried out anywhere in the United Kingdom, and many provide for travel within the British Isles. Cancellation rights are governed by FUNE: providers must allow cancellation within 30 days of sale with a full refund and must specify the basis on which later cancellation refunds are calculated.
Where a provider fails after 29 July 2022, the Financial Services Compensation Scheme can continue plans through a successor or refund consumer monies [7]. Where a provider failed before that date — as occurred with the high-profile failure of Safe Hands Plans Limited in March 2022 — consumer protection depended on whether plan monies were held in a properly constituted trust.
Tax treatment is straightforward: funeral plan payments are not deductible for income tax purposes, and the funeral itself is not a taxable event. The plan does not form part of the planholder’s estate for inheritance tax, because the contract has already been performed.
Simple plans cover a basic funeral with limited disbursements — typically a direct cremation or a no-attendance cremation. Prices are at the lower end (often £1,500–£2,500).
Standard plans cover a traditional funeral service with attended cremation or burial, including the funeral director’s services, hearse, coffin and a defined disbursement allowance. Prices in 2026 typically range £3,500–£4,500.
Premium plans add limousines, an upgraded coffin, additional service venues and higher disbursement allowances. Prices sit at £4,500–£6,000 and above.
Direct cremation plans are a separate sub-category that has grown rapidly in the United Kingdom from around 2020. They cover collection of the deceased, the cremation itself, and return of ashes, with no attended service. They are typically the cheapest plans on the market.
Burial-specific plans cover the burial fee and grave purchase but normally exclude the cost of the grave plot itself, which the family must arrange separately.
Whole-of-life backed plans are funded through an assigned whole-of-life insurance policy rather than a trust, and are subject to the same FUNE requirements.
An illustrative example. A planholder takes out a standard funeral plan in June 2026 with an authorised provider for a single payment of £4,200. The plan covers the funeral director’s services, the coffin, the hearse, conducting the funeral, and a disbursement allowance of £1,200 for crematorium fees, doctors’ fees and minister fees.
The planholder dies in 2041. The funeral director nominated by the provider is contacted by the family. The provider draws £4,200 (plus accumulated trust growth where applicable) from the trust to fund the funeral. Actual disbursements in 2041 are £1,650, so the family pays the £450 shortfall. The funeral director’s own costs, the coffin and the hearse are delivered in full at no additional cost, because they were paid for in 2026 at 2026 prices.
If the provider had failed in 2030, the Financial Services Compensation Scheme would have stepped in to continue the plan via a successor provider, because the plan was entered into on or after 29 July 2022 [7].
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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