Major superannuation changes to crackdown on dodgy operators

Shonky operators that scam vulnerable Australians have been targeted under new reforms to strengthen the superannuation and financial system.

Assistant Treasurer and Financial Services Minister Daniel Mulino on Wednesday announced the changes will improve consumer protection against harmful lead generation via social media, online ads or cold calls.

“These reforms are designed to disrupt some of the most damaging business models operating in the system today,” he told the National Press Club.

“They intervene at the earliest point of consumer harm, reducing opportunities for bad actors to access potential victims.”

The reforms include a ban on unlicensed superannuation lead generators, stricter requirements on consumer consent, a limit on financial advice to existing clients, and increased penalties for breaches of anti-hawking laws.

Managed investment schemes will also be forced to tell the Australian Securities and Investments Commission (ASIC) when they freeze, suspend or restrict a client’s ability to redeem their investments.

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A new framework would also allow ASIC to direct superannuation trustees to begin remediation when an investment option fails and there is reasonable suspicion trustees have failed to meet their obligations.

Trustees would also be required to compensate their members’ losses if they breached their obligation.

“These reforms will make superannuation safer from every angle, crack down on bad actors wherever they operate, and strengthen confidence in the system,” Mulino said.

The changes come following the collapse of the Shield and First Guardian Master Funds that saw almost 12,000 people lose more than $1 billion in retirement savings.

Nine.com.au has reported extensively on the collapse of the funds and the impacts on the victims.

Both companies were managed investment schemes that grew rapidly because lead generators would cold call potential clients and pass them on to financial planners who would switch their super funds.

“The lesson from Shield and First Guardian is that modern consumer harm can be sophisticated, interconnected, scalable and readily replicated,” Mulino said.

Mulino said reports of similar lead generator activity continue to emerge, leaving Australians at risk.

“The perpetrators are sophisticated and effective. They are then referred to a financial adviser. Recommendations are made. Savings are moved,” he said.

“In many cases, large portions or even all of a person’s retirement savings are directed into a small number of products.

“Sometimes these products are highly risky, not transparent and not diversified. Sometimes they are not what the person has asked for.

“Those savings can ultimately end up in managed investment schemes that collapse, causing devastating losses.”

Wednesday’s announcement comes as superannuation changes come back into the spotlight this week following One Nation Leader Pauline Hanson’s call for Australians to access their super early in a cost-of-living crisis.

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Opposition Leader Angus Taylor said he has no plans to change the super system but would support flexibility to allow taxpayers to invest how they see fit.

Labor criticised both the Coalition and One Nation, warning voters that the next election would be a referendum on superannuation.

“The stakes are high at the next election for a whole range of reasons and one of them now is the future of Australia’s world-leading compulsory superannuation system,” Treasurer Jim Chalmers said on Monday.

“They share a dangerous and divisive anti-worker, anti-super ideology, and if this plays out after the next election, Australian workers will be much worse off.”