The Mail on Sunday today raises serious concerns about the way funeral company Safe Hands dealt with customers’ money before it collapsed.
Our investigation into the Yorkshire-based firm – which had 47,000 customers when it went under six weeks ago – found bosses were skimming off cash from the trust fund that was meant to pay for funerals.
We can reveal that the trust fund had plunged £3.7million into the red – even though the money was supposed to be ring-fenced and protected.
Company accounts scrutinised by the MoS show money from this vital trust fund was routinely being paid into Safe Hands’ general company coffers. The company was then paying large sums of money to its shareholders.
Victim: Kim Sharp says the company should be renamed Unsafe Hands
In one year, £2million of ‘surplus’ cash was paid from the trust fund to the company. That same year, £2million was also paid in dividends from the company coffers to its shareholders.
Records at Companies House confirm that the majority shareholder prior to the company’s acquisition by SHP Capital Holdings in early 2020 was Malcolm Milson.
An independent actuarial report, prepared by Zenith Actuarial and obtained by the MoS, also raises concerns over the investment management of the £60 million trust fund. It queries a shortfall in the payments made into the fund (from cash given to Safe Hands by planholders) and the amount actuaries ‘would have expected’.
Having insufficient money set aside to pay for funerals that Safe Hands had promised to customers ultimately pushed the company to the point of collapse.
Tens of thousands of people had given Safe Hands more than £3,000 each, after being told it would save their families the hassle of paying for a funeral when they died.
But customers have now been sent letters warning they are unlikely to get the funerals they paid for. Hundreds of victims have contacted this newspaper following our reporting of the emerging scandal over the past six weeks.
As we report opposite, many are elderly – the average age of plan-holders is 70 – and feel betrayed.
A big selling point of the plans was that customers’ money was protected in a secure ring-fenced trust fund, overseen by independent trustees and managed by a reputable investment manager.
Fears: MP Lucy Allan will raise it in Parliament
Lucy Allan, Conservative MP for Telford in Shropshire, has a business background.
She contacted The Mail on Sunday last week, following our reports. Like the MoS, she has examined the accounts of Safe Hands, based in Wakefield, West Yorkshire, and does not like what she has seen.
She said: ‘If Safe Hands’ planholders’ entitlements are not honoured it would undermine the trust and confidence in the whole funeral plans industry.’
Allan added that pressure needs to be brought to bear on industry leaders to find a solution ‘that protects plan-holders and the integrity of the sector’. Major players include the Co-op, Dignity and Prosperous.
So far, the Government has refused to intervene. It points to imminent regulation of the industry by the Financial Conduct Authority as evidence of its determination to create a sector fit for purpose.
John Glen, Economic Secretary to the Treasury, has said that bringing the industry into regulation will expose ‘unsustainable business models’ and prevent any problems ‘from getting worse and impacting more consumers’. Allan said she would be raising the Safe Hands scandal in Parliament as soon as the Easter recess ends in nine days’ time.
WHAT OUR PROBE HAS UNCOVERED
Like a majority of funeral plan providers, Safe Hands put most customers’ payments into a trust fund – the Safe Hands Plans Trust. Deductions were made for commissions paid to third-party sellers.
As customers confirm above, the trust fund was a big selling point as it gave them reassurance that their money would be safeguarded. Plan literature promoted this point.
It informed customers the trust would be ring-fenced (separate from the main Safe Hands business), controlled by independent trustees, and the money invested by professional fund managers.
It said: ‘As one of the UK’s premier funeral plan providers, it is of paramount importance to us… that our customers’ investments are safe and secure.’
But accounts for Safe Hands Plans, filed at Companies House, suggest the trust was used to provide dividends to company directors, depleting the assets available to pay for planholders’ funerals.
The accounts do state the firm had the ‘right’ to these surpluses – while having an obligation to make good any fund deficit if it arose.
So, for the year to the end of May 2018, the accounts confirm that £2million of trust fund surplus – the difference between assets and liabilities – was used to boost the firm’s income. The same amount was then paid in dividends to shareholders.
In the previous year, the firm’s income benefited from the transfer of just short of £1.17million from the trust fund with company dividends paid of £1.13million.
The accounts also show that director Malcolm Milson, appointed at the end of July 2017, received consultancy fees of £110,400 as well as having an interest-free loan from the company of just short of £3.5million.
Also, a debt for £114,444 due from businesses controlled by ‘the director’ (Milson was one of two for most of the year) was written off because the amounts ‘were not recoverable’.
Although the accounts for the next two years do not disclose equivalent information, they do confirm that trust surpluses were skimmed off in 2019 (£200,000) and 2020 (just under £2.4million).
Milson left the company in February 2020 when it was taken over by SHP Capital Holdings.
ACTUARIES DISCOVER A £3.7M SHORTFALL
At the end of January this year, actuary Zenith Actuarial produced an independent report on the Safe Hands Plans Trust. The report does not pull punches. It raises numerous concerns, notably a fund shortfall or deficit of £3.7million.
In other words, the assets of £60.7million are insufficient to cover the future cost of funerals promised (£64.4million).
It also points out a shortfall in the expected contributions into the fund – and is alarmed about how the fund’s assets are invested by the fund manager.
These are investments initially made by an adviser before being taken over by the fund manager.
It says: ‘We remain very concerned about the investment funds and the potential lack of liquidity, specialist focus, high charges and potential issues relating to divesting.’
The fact that the investment funds are mostly based in the Cayman Islands is noted by Zenith.
‘It’s a disgrace. Like many Safe Hands victims we can’t afford to lose our cash’
Victim: Piano teacher Janet Denham says she now feels she was cheated
This scandal has to be resolved.’ That was the blunt message last week from Janet Denham – one of 47,000 victims of the Safe Hands Plans funeral company collapse.
Many have contacted The Mail on Sunday to vent their anger over the potential loss of the money they entrusted to the firm to ensure their funeral would be paid for when they died.
It is a view echoed by everyone we have spoken to caught up in this mounting scandal, from those like Janet in their 60s to customers in their 80s. They all want to know why the trust fund they put their money into – overseen by independent trustees – does not have enough assets to pay for the funerals they were promised.
Janet, a piano teacher, took out a Safe Hands funeral plan three years ago. ‘Both my parents had dementia and at the end it was a nightmare sorting out their finances,’ says the 62-year-old from Bordon, Hampshire, who is divorced and has a 31-year-old daughter. ‘I vowed then that I wouldn’t put my daughter through what I experienced. So I turned to a will writer, updated my will and through them bought a Safe Hands funeral plan for £3,880.’
The letter last month from the administrators of Safe Hands, informing her (and all other customers) that the funeral she had paid for would not be honoured, has left her devastated.
‘I can’t believe what has happened,’ says Janet. ‘With hindsight, I wish I had put the £3,880 in a cash Isa or kept it in my bank account. Never in a million years did I expect Safe Hands to renege on its promise. I feel cheated and can’t bear thinking about the fact I might have lost all my money. I will never buy such a plan again.’
Like Janet, Kim Sharp, from Orpington in South-East London, bought a plan to ensure her children wouldn’t have to worry about her funeral arrangements if anything happened to her.
Kim, also 62 and divorced, reminded her three children where her plan details were kept when she contracted Covid and ended up in hospital. Having made a full recovery, she has now been rocked by the news that her Safe Hands plan could be worthless. ‘Unsafe Hands is more to the point,’ she says.
Kim, a former store manager, bought her plan six years ago after seeing a couple of close friends die. She paid in instalments, reaching a total of £3,395. ‘I was pleased with myself,’ Kim says. ‘The policy covered the cost of all funeral arrangements apart from flowers, so my kids wouldn’t have to worry about the expense.’
She was reassured by the fact her payments would be held in trust. The Safe Hands literature she received said her money would be held in a ‘ring-fenced trust fund’ overseen by independent trustees and managed by a ‘multinational investment management firm’. She says: ‘I never thought the plan was anything but rock solid safe.’
Having taken early retirement during the pandemic, she now gets by on an annual pension of £12,000. She says there is no way she could afford another plan. ‘What has happened at Safe Hands is a scandal and it needs resolving,’ says Kim. She has contacted her local MP, Gareth Bacon, who has promised to look into the matter. Jayne Moore, a 56-year-old credit controller from near Nottingham, took out a plan three years ago – at the same time as her parents, both in their early 80s, purchased plans.Like Kim, Jayne has written to her MP, but has yet to get a response.
‘Something has to be done to get our money back,’ she says. ‘My dad has cancer and it is so distressing for him. He’s an astute individual and when he bought the plans he did his homework and read all the small print. He was convinced by what he read.
‘Old and vulnerable people like my parents have been taken for a ride. When you’re told your money is safe in a trust fund, you expect that to be the case. I’m appalled – people have been let down in spectacular fashion by Safe Hands.’
Sylvia Sutherland, from Caithness, has a Safe Hands plan with partner David Seaman, 71. It was meant to cover the funeral costs of whoever died first. They bought it six years ago for nearly £4,000.
‘We scrimped and saved to pay the monthly premium,’ says Sylvia, 59, who can no longer work because of back problems. David is retired after working part-time for a fishing company.
Sylvia says: ‘I was livid when I got the letter from the administrators saying the trust fund did not have enough money to meet the cost of all the funerals promised.
‘You try to do the best things in life and protect your children from worrying about sorting out your funeral – and then you find out your hard earned cash was not as safe as you were told.’
Sylvia adds: ‘It’s a disgrace. Like a lot of other people caught up in this Safe Hands scandal, we cannot afford to lose our money.’
ACTION SINCE THE DEFICIT WAS REVEALED
The fact that Safe Hands’ trust fund was in deficit would have been enough for the Financial Conduct Authority to tell the company it would refuse its application to be authorised from the end of July – thereby giving Safe Hands the opportunity to withdraw from the process.
This is what happened in mid-February with the FCA confirming the company had withdrawn its application. It then issued a stark warning: ‘Do not buy a new funeral plan from this firm.’
Late last month, Safe Hands collapsed, leading to the appointment of administrators FRP Advisory. In a note to planholders, FRP alarmed customers by saying the legal structure of some of the trust fund’s assets was ‘complicated’ and it was unsure which could be realised for the benefit of planholders.
WHAT THOSE IN CHARGE HAVE TOLD US
Last week, The Mail on Sunday tried to contact Richard Philip Wells, a director of SHP Capital Holdings, by email and phone for an explanation of the poor health of the trust fund. He did not respond.
The administrator FRP declined to comment, although it is carrying out a detailed investigation into the failure of Safe Hands Plans.
Senior people at Safe Hands have been asked by FRP to attend interviews regarding the company’s collapse. Failure to attend will lead to them being required to go to court and be questioned under oath.
Sterling Trust Corporation, which looked after the trust fund, said it was ‘working closely’ with the administrators to find a solution that helps funeral planholders.
The FCA said: ‘People who bought a pre-paid funeral plan with Safe Hands will be understandably concerned. The Government changed the law to bring pre-paid funeral plans under our regulation from the end of July. Until then, these firms are unregulated and we have limited powers.’