Submission – Enhancing member protections in the superannuation system

Australia’s super system exists for one purpose: to enable millions of everyday working Australians to retire with dignity on incomes well above what the modest taxpayer-funded Age Pension could deliver. For most Australians, super will be one of the largest financial assets they ever own, often second only to the family home. Our system is the envy of the world. As Australians’ super balances grow, so too does the opportunity for unscrupulous operators to exploit consumers. Over the past decade, there has been an alarming rise in business models and conduct designed to extract maximum value from them with high-pressure sales tactics, conflicted distribution channels, overly complex investment structures, and weak governance arrangements. Several recent high-profile cases have laid bare the scale and consequences of these serious consumer risks. They’ve highlighted the urgency for policymakers and regulators to lift the bar on minimum consumer safety standards. The devastating collapses of Shield and First Guardian should not be dismissed as isolated incidents. In truth, they are a warning sign. They have demonstrated how quickly catastrophic harm can be inflicted on a very large number of consumers when bad actors identify safety gaps in the system and use them to channel large volumes of retirement savings into high-risk or poorly governed structures. They also show how some emerging distribution models, including lead generation, switching pathways and some of the newer and less well governed platform arrangements, can make these movements appear normal or low risk to everyday Australians and expose consumers to serious risks.

This submission identifies a fundamental weakness in the current system — one that many Australians would not be aware exists: consumer protections are not consistently strong across the super system. SMC’s guiding principle is simple: consumer protections should be lifted across the system to match the standard already operating in high performing, rigorously governed, tightly regulated master trust super funds.