Super Nation is a fortnightly column that examines, explains and analyses key issues in one of Australia's largest, fastest-growing and most important industries: superannuation.
Hot under the collar would be an understatement describing the mindset of Australians who have lost their life savings to scammers.
But a proposal from the Australian Government to introduce a cooling-off period for moving money between super funds has not exactly been warmly embraced by some in the A$4.3 trillion industry.
Assistant Treasurer and Minister for Financial Services Daniel Mulino floated the idea at a meeting with industry stakeholders in December as part of a package of reforms to protect Australians from the theft of their retirement savings.
The new period that super fund members would have to wait before moving their retirement savings was not disclosed.
The forum was convened in the wake of the collapse of the First Guardian and Shield master funds, which cost about 11,000 investors almost $1 billion and have resulted in compensation payments by fund trustees, regulator litigation and other action.
It was not formally disclosed in a media release from Mulino, and when he spoke to journalists the same day about the action the Government would be taking to create a safer, more secure retirement system.
The focus of the release and news conference was the rising cost of the Compensation Scheme of Last Resort (CSLR), which compensates victims.
It is also not mentioned in a discussion paper issued in December about how to make the CSLR more sustainable, for which submissions close on 13 February, but it may be the subject of a separate consultation process this year.
But Mulino gave a hint of what may be coming, particularly the importance of slowing down the process, when he said: “We want consumers to be protected from being pushed to make quick decisions before moving what are now large superannuation balances.”
“Finding ways to give them more time before switching their superannuation is critical to that.”
He is expected to soon begin consultations with key stakeholders about the length of a cooling-off period and when it should be imposed.
Under the Superannuation Industry (Supervision) Regulations 1994 (SISR), once a rollover request is valid and complete, the fund must process the rollover as soon as practicable, and generally within three business days.
Plan draws fire
Super Consumers Australia (SCA), which speaks for low and middle-income Australians not traditionally represented by other bodies, was not supportive of the idea.
“There’s a lot of proposals floating around. There’s going to be more than one thing. The cooling off period is one of those things but we’re not sure that will work,” Chief Executive Officer Xavier O’Halloran told Azzet.
He said scammers sometimes preyed on their victims for months from the first phone call from a lead generator until the super was moved across.
“If you implement a cooling-off period you are not going to change anything,” he said.
“It needs to be more around how you get good information to consumers through this period.”
This included guidance about the historical returns of other funds that super fund members may be considering switching their super into, and independent resources on their various options.
It also failed to land well with the Financial Services Council (FSC), which represents companies in the financial services sector, including super funds.
CEO Blake Briggs said the Shield and First Guardian collapses required an evidence-based regulatory and legislative response from the Government.
“Indications that the Government intends to limit consumers’ legitimate right to choose their own superannuation fund, however, is not the right approach,” he said.
Selective ‘cooling-off’ periods for people moving to an SMSF or superannuation platform were not supported by the evidence in lead determinations from the Australian Financial Complaints Authority (AFCA), where consumers were often courted for weeks or months by lead generators and unethical advisers.
“A heavy-handed response also risks undermining the benefits of competition that platforms have brought to super, particularly when some incumbent ‘safe’ funds have underperformed and underinvested in service quality,” Briggs said.
“The priority should be implementing long-overdue financial advice reforms and targeted measures to address the harm exposed by Shield and First Guardian, including licensing lead generators, strengthening managed investment scheme registration, and modernising the wholesale investor definition.”
SMSF Association CEO Peter Burgess said his association did not support the proposal.
“If you think about self-managed super funds (SMSFs), once the money has been rolled into the fund and the fund has been established, costs have been incurred and in many cases the money is invested quite quickly,” he said.
“From a practical point of view, I just don’t even know how it would work, whether there would be some type of rule that, for that cooling off period, the money couldn’t be invested.
“That just creates complexity and costs and is a disincentive for people to move funds.”
The Super Members Council of Australia (SMC) urged the Government to fast-track and fund a comprehensive package of stronger super consumer protections in the 2026 Budget to safeguard Australians’ life savings, including:
- a crackdown on aggressive selling of super products through social media ads and cold calling, and
- stronger safeguards to protect both consumers and advice licensees from potential conduct risks arising from conflicted remuneration.
“The collapses of Shield and First Guardian, where 12,000 Australians lost some or all of their life savings, must make stronger consumer protections in super a key priority in the Budget,” CEO Misha Schubert said in a statement.
Real world examples
The type of practices the Government is trying to stop has been set out in determinations by AFCA regarding complaints about MWL Financial Services Pty Ltd (In Liquidation) and United Global Capital Pty Ltd (In Liquidation).
In those cases, Australians were cold-called and helped to set up SMSFs, roll over their retirement funds into the new funds, and invest the money in Shield or First Guardian.
The inappropriate advice they received resulted in losses for which AFCA made compensation determinations of $95,902.95 in respect of MWL Financial Services and $229,505.68 in respect of United Global Capital.
In one case, the fund member was vulnerable, worried about her financial future after a recent divorce and had a low super balance.
