Don’t make victims pay for financial advice failures: Super Consumers
Super Consumers Australia said today’s revised Compensation Scheme of Last Resort (CSLR) levy estimate shows why Australia needs strong consumer protections and a sustainable compensation scheme, not lower compensation for people who have already lost retirement savings through financial misconduct.
The CSLR has today published its revised FY27 levy estimate of $198.1 million, up from the initial estimate of $137.5 million. The increase is largely driven by a 71% rise in expected compensation claims, from 912 to 1,567, with the largest share coming from personal financial advice failures, including Shield and First Guardian Master Funds.
Super Consumers Australia Director of Policy Jessica Spence said that the levy report demonstrates exactly why compensation matters. The CSLR is expecting to process more than 1,500 claims in FY27. “For many people, compensation from the CSLR is life changing: this is their super. It is the money they worked their whole lives to build so they could retire with dignity,” Ms. Spence said.
Super Consumers said the levy increase would be seized on by some in the financial services sector to argue that consumers should receive less compensation.
“People who have lost their retirement savings because of financial misconduct should not be punished to make the levy cheaper for financial firms,” Ms. Spence said. “The solution is not to pay innocent investors less. The answer is to stop this harm from happening in the first place.”
In a recent joint submission to Treasury, Super Consumers Australia, CHOICE, Consumer Action Law Centre, Consumer Credit Legal Service, Financial Counselling Australia, Financial Rights Legal Centre and Mob Strong Debt Help warned against changing the longstanding “but for” approach to compensation as a response to CSLR funding pressure. Currently, the law requires financial advisers that have engaged in misconduct to pay their clients an amount of money required to put them back in the financial position they would have been in but for the misconduct.
The joint submission argues that a person’s loss does not shrink because the firm that harmed them becomes insolvent, and that the CSLR should pay consumers what they were already found to be owed, subject to the existing compensation cap of $150,000. Ms. Spence said reducing compensation would particularly impact some of the poorest Australians approaching retirement who have lost significant portions of their superannuation through financial scandals.
Super Consumers is calling on the Government to introduce legislation which fixes the causes of harm, gives the CSLR better recovery powers, and builds a fairer and broader funding model that includes the sectors connected to these failures, including managed investment schemes and self-managed super funds.