FPCOB 3.2 Trusts: solvency assessment, remediation and other requirements

This 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.

A 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.

The 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)

   For 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)

   A 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.

If 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.

The 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.

The 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.

The 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).

A 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)

   If, 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.

A 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.

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