Superannuation peak body ASFA has warned that the government’s move to include APRA-regulated super funds in the Compensation Scheme of Last Resort (CSLR) levy 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 CEO 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,” Ms Delahunty said.
Raiding super not the answer
Ms Delahunty said it was wrong in principle to use Australians’ retirement savings to fund compensation for losses in other sectors through the CSLR, because 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,” Ms Delahunty 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,” Ms Delahunty said.
The CSLR needs to be overhauled
ASFA said that as the CLSR’s scope and costs had grown, so had the temptation for the government to shift the funding burden onto well-regulated sectors that already have their own compensation arrangements and no record of leaving losses uncompensated. The CLSR therefore urgently needs to be overhauled to make it sustainable and fair.
“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.
“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,” Ms Delahunty concluded.
ENDS
For further information, please contact:
ASFA media team
0451 949 300
mediaunit@superannuation.asn.au
About the Association of Superannuation Funds of Australia (ASFA)
ASFA, the voice of super, has been operating since 1962 and is the peak policy, research and advocacy body for Australia’s superannuation industry. ASFA represents the APRA regulated superannuation industry with over 100 organisations as members from corporate, industry, retail and public sector funds, and service providers. We develop policy positions through collaboration with our diverse membership base and use our deep technical expertise and research capabilities to assist in advancing outcomes for Australians.
We unite the superannuation community, supporting our members with research, advocacy, education and collaboration to help Australians enjoy a dignified retirement. We promote effective practice and advocate for efficiency, sustainability and trust in our world-class retirement income system.