Thousands of people who had saved up to pay for their funerals risk losing money after plan provider Safe Hands collapsed into administration.

The restructuring firm appointed to handle the process, FRP, said it was unable to provide immediate refunds to Safe Hands’ 46,000 customers, raising concerns that pre-purchased funerals would not be honored .

For the next fortnight, Dignity, one of the UK’s largest undertakers, had agreed to hold the funeral on behalf of the company. The window will be used by FRP to explore a longer-term solution, such as transferring its funeral plans to another company.

On its website, Safe Hands told customers it was “uncertain if funeral plans could be carried out”. Customers should consider their plan “terminated with immediate effect”, he said. “This includes partially paid funeral plans and funeral plans in process. No other payment by direct debit or standing order will be cashed.

The funeral home industry is being overhauled and from this summer any supplier will be regulated by the Financial Conduct Authority, a move that will provide greater protection for consumers.

Based in Wakefield, West Yorkshire, Safe Hands was acquired by private equity firm SHP Capital Holdings two years ago. Tom Gormanly, who joined as chief executive at the time of the deal, stepped down earlier this month.

The company went bankrupt after severe financial difficulties, including the strain caused by the pandemic, rendered it unsustainable in its current form, FRP said.

“Our immediate goal has been to secure an interim funeral service benefit with Dignity for the next 14 days to ensure that all plan holders who pass away are cared for while we seek to find a longer term solution.” , said Nedim Ailyan, one of the administrators.

“Unfortunately, administration means the company is unable to issue refunds at this time. We understand how shattering this time of uncertainty will be.

The FRP said it would carry out a detailed investigation to find out what could be returned to creditors, including policyholders whose money is being held in a trust fund, itself in deficit.

“Unfortunately, there is a gap between the level of investments by plan holders and the expected level of funeral plan costs to be paid,” Ailyan said. “Essentially, the value of the investments is not sufficient to meet the company’s funeral plan obligations.”

Customer payments were used to acquire investments including stocks, bonds, cash, real estate and loans. The legal structure was complicated and the FRP said it needed to know which ones could be made for the benefit of plan holders.

The process of realizing assets and issuing partial refunds to planholders was a significant undertaking and would take some time, administrators said. They would contact planholders to explain how they could register a claim. Plan holders and their families can also contact the company’s customer services team on 0800 640 9928.