A fraud inquiry has begun into the funeral plan provider Safe Hands, which collapsed leaving thousands of people with lost savings.

Some 46,000 people had paid into a fund towards future funeral costs.

Its collapse meant pre-paid funerals may not be honoured and some people had paid in instalments up to 拢4,000.

The Serious Fraud Office (SFO) said it was investigating a suspected fraud at the company and its parent, SHP Capital Holdings Ltd.

• Fears funeral plan reforms could mean thousands lose money

Funeral plans are designed to allow people to set money aside during their lives, to help their families pay for a funeral when they die.

The plans became particularly popular as funeral prices soared, but there were questions over the lack of protection if a provider went bust.

Since last July, providers have required approval to operate from the Financial Conduct Authority (FCA).

As reported previously by the BBC, Safe Hands withdrew its application for approval by the FCA, then subsequently collapsed and went into administration in March last year. Administrators said the company faced a "combination of factors, some of which are understood to be linked to the Covid pandemic".

'Lost peace and security'

Nick Ephgrave, director of the SFO, said: "Thousands of individuals from all corners of the UK lost peace and security after being sold a product on the basis it would help reduce the burden on their loved ones upon their death.

"Today, we have taken decisive next steps in our full criminal investigation into Safe Hands Plans."

The SFO has written to stockbrokers, financial institutions, banks and other witnesses as part of the inquiry.

Creditors of the company have claimed around 拢70.6m, according to administrators who are keeping customers updated with developments.

They are now selling off the collapsed company's investments so they can return some money to customers. However, they warned there was a shortfall, which means that the value of these investments is not enough to meet the company's funeral obligations

UK funeral plan sector

• Approximately 65 companies
• 1.6 million customers
• 200,000 funeral plans taken out every year
• Average plan costs 拢4,000
• Average plan lasts for 8 years

Source: FCA/Fairer Finance