Proposed reforms to fix serious consumer protection gaps and compensation scheme a welcome step forward

Super Members Council

The Super Members Council welcomes the Government’s meaningful steps to strengthen consumer protections around super and make the compensation scheme fairer and more sustainable.

When 12,000 Australians lose more than $1 billion of their lifesavings as we saw with the collapses of Shield and First Guardian, the response needs to be comprehensive to avoid future consumer harm.

The Government’s proposals to crack down on harmful lead generation, ban switching advice fees and increase governance obligations for platform trustees go a long way towards achieving that.

The Council also supports the Government’s move to reset the compensation scheme by better reflecting where the biggest losses and risks are in the system.

Recent regulatory failures have shown how aggressive lead‑generation practices, high‑pressure sales tactics and poor oversight can funnel Australians out of well‑regulated super funds and into unsafe or unsuitable products, amplifying losses and undermining trust across the system.

However, meaningful consumer protections also depend on better information at the point of decision-making. Consumers making a potentially risky switch need a true like-for-like comparison of how their super will fare by retirement if they stay or switch, including all returns, fees and costs.

The Council has also consistently called for a detailed review on conflicted remuneration and for official guidance to be refreshed to ensure there are no loopholes in this key protection – this is missing from the Government’s proposals and there is further work to be done.

The Council has long called for stronger consumer protections, including:

• A crackdown on aggressive selling tactics through social media ads and cold calls.
• Removing any conflicts of interest wherever they arise in the chain.
• Strengthening obligations on any process that involves super switching.
• Stronger super platform and product accountability.

“The proposals are important steps towards protecting Australians from catastrophic financial collapses that destroy their retirement savings – but there is an opportunity to go further,” says the Council’s Acting CEO Georgia Brumby.

“If people are considering switching from a tightly regulated super fund into a potentially higher risk product, they deserve clear, like-for-like information that genuinely helps them understand the difference this will make to their retirement – so they’re not left comparing apples with oranges.”

The Council welcomes improvements to the Compensation Scheme of Last Resort. When SMSFs account about 80% of existing claims on the CSLR scheme relating to advice in that sector, ensuring they can only claim from it if they help support it will make it fairer and more sustainable.  

“We strongly oppose pushing the bill for the compensation scheme’s blow outs onto ordinary Australians who have chosen the safeguards of the highly regulated super system, but the proposed changes will make the scheme more sustainable,” added Ms. Brumby.

It's also crucial the Government gets on with enacting its promised Delivering Better Financial Outcomes (DBFO) reforms and delivers them alongside a package of stronger consumer protections.

“Not progressing promised DBFO reforms alongside consumer protections would be a mistake. These advice reforms are a consumer protection in their own right and will help protect Australians from predatory social media ads and cold calling.”