Following the minister’s announcement on Wednesday morning that super fund trustees would cover 12.9 per cent of the FY26 Compensation Scheme of Last Resort (CSLR) special levy, which equates to around $6.1 million, the Association of Superannuation Funds of Australia (ASFA) said the move risks undermining trust in Australia’s compulsory retirement savings system.
“Forcing 18 million Aussies who are super fund members to fund the CSLR will set a dangerous precedent,” ASFA chief executive Mary Delahunty said.
“It risks treating retirement savings as a convenient pot of money for solving problems, rather than keeping super focused on providing a dignified post-working life for Australia’s retirees.
“In a compulsory system, people must be able to trust that the government takes the legislated objective of super seriously. The objective of super is to preserve Australians’ savings so they can provide income in retirement. If the government sets the precedent of using people’s retirement savings for other reasons, that will undermine trust in the system.”
The cost for super fund trustees is still less than the financial advice sub-sector will pay for the special levy at $10.4 million, which is on top of the $20 million that advisers have already paid.
However, Delahunty said using Australians’ retirement savings to cover losses from other sectors of the financial system is wrong in principle, particularly as most super fund members cannot benefit from the scheme.
“Super has its own compensation mechanism, already paid for by super fund members under Part 23 of the Superannuation Industry (Supervision) Act. If super fund members suffer losses, it is through those arrangements, not the CSLR, that they may be compensated,” she said.
“The financial demands on the CSLR are projected to grow again next year. If super fund members are being called on to fund something they can never use, simply because the costs have become unmanageable, then the CSLR needs fixing, and fast.
“It is like being forced to pay for home insurance not only for your own house, but also for someone else’s house in another town.”
Overhaul the CSLR
While she was adamant the super sector should not be the ones paying, Delahunty did push for an overhaul of the CSLR entirely.
In large part, this is down to the scope and costs exploding creating a temptation for the government to look beyond the included sectors to cover the funding of the scheme.
“Making the CSLR sustainable requires more than filling its funding gaps. We need to reduce the compensation payable to investors in the first place by preventing the losses they could experience through things like lead generators, aggressive sales tactics, and bad financial advice,” Delahunty said.
“The purpose of the Compensation Scheme of Last Resort is evident in the name. It should be an option where all other options have failed. That means preventive measures to protect investors from wrongdoing should be at the forefront of the government’s reform agenda. Put simply, we think prevention is better than compensation.”
Last month, the Super Members Council argued that any move to spread the cost of the CSLR to super funds would be handing the bill to “12 million low- and middle-income Australians”.
“The CSLR was created to compensate victims of financial misconduct as a last resort after all other options to recover money had been exhausted. A key design principle was that the parts of the financial services system from which the consumer harms had arisen would bear that cost,” the SMC said in a statement.
“It would be a clear breach of that principle to force millions of everyday Australians who are members of highly regulated profit-to-member super funds to pay into this scheme.”
Industry super squealing like pigs about paying $6m but not so much when it comes to losing over a billion dollars in failed private equity investments and all their recent fines in the 10’s of millions for not paying appropriate insurance claims.
Another blow hard whinge from ASFA.
Get a grip Delahunty, you will personally likely pay 50c. And most of your ISF members less each.
Innocent Advisers x 15,000 are each having the Government steal our income, paying thousands annually for wrongs we have not caused or had anything to do with.
MIS continue to PAY NOTHING !!!!!!!!!!
And funding it from advisers who do not commit any of the crimes is appropriate – is it?
“It risks treating retirement savings as a convenient pot of money for solving problems, rather than keeping super focused on providing a dignified post-working life for Australia’s retirees.
“In a compulsory system, people must be able to trust that the government takes the legislated objective of super seriously. The objective of super is to preserve Australians’ savings so they can provide income in retirement. If the government sets the precedent of using people’s retirement savings for other reasons, that will undermine trust in the system.”
Whilst I agree completely with Mary’s comments, I note that she didn’t complain this loudly when Div296 was set to wipe out the retirement savings of SMSF members. In fact, I recall that she supported the proposed tax. Vested interest is a wonderful thing.