Super funds push back on CSLR: SMC

The Super Members Council (SMC) has urged the federal government reject proposals that would expand funding responsibility for the Compensation Scheme of Last Resort (CSLR) to Australians in APRA-regulated superannuation funds, arguing the costs should remain with the sectors responsible for consumer harm.

In a submission to Treasurys consultation on CSLR reforms, the industry body said the scheme was established as a genuine last resort compensation mechanism and designed around the principle that sectors generating misconduct should fund the costs of compensation.

"This should be a fair, sustainable compensation scheme of genuine last resort that doesn't double-tax hardworking Australians in safe, well-regulated parts of the super system, not one that socialises the cost of financial misconduct to the nation's lowest-wage earners instead of holding the people responsible to account," SMC chief executive Misha Schubert said.

The submission comes as the CSLR faces mounting pressures from growing numbers of unpaid compensation claims linked to failed financial schemes. SMC noted the collapse of a single advice firm had already exceeded several years of the scheme's original actuarial costs forecasts, with claims related to the Sheild and First Guardian collapses yet to fully emerge.

The council criticised a proposed "levy waterfall" model that would spread costs across broader sections of the financial services industry once sectors directly responsible for losses reach their funding limits. It argued the approach risks creating moral hazards by reducing accountability for higher risk sectors.

SMC also raised concerns about proposals that would allow self-managed super funds (SMSFs) to opt in or out of the scheme while requiring members of mainstream super funds to contribute regardless.

"It would be deeply unjust for the government to compulsorily force millions of the nation's lowest-paid workers to pay a levy for this scheme they will never claim on but then give wealthier Australians with SMSFs a choice to opt in or opt out that no-one else gets," Schubert said.

SMC called for managed investment schemes to be included in the funding base, compensation payments to be limited to actual losses, and stronger consumer protection reforms to reduce future claims on the scheme.

"Prevention is always better than clean-up. Nothing short of large-scale consumer safety reforms that comprehensively lift the bar on consumer safety will stop continuous flooding of the scheme. Merely tinkering around the edges on safety will only lead to more Shield and First Guardian style collapses," Schubert said.