Superannuation council urges government to use unclaimed funds for victim compensation scheme
The Compensation Scheme of Last Resort should not be bankrolled with members’ money but rather unclaimed funds should be used to cover Shield and First Guardian payouts.
Unclaimed superannuation could be redirected to bolster the teetering Compensation Scheme of Last Resort (CSLR), the Super Members Council has urged, as it takes aim at the Albanese government’s plans to tap funds for losses from high-risk schemes.
The Super Members Council, which represents several key players in the sector including heavyweights Australian Retirement Trust, Australian Super, Aware Super, and Rest, warns that the government’s thinking to fund the CSLR risks punishing prudent operators.
The Albanese government is staring down opponents of its plan for how to handle a looming call on the CSLR in the wake of the Shield Master Fund and First Guardian scandals, which risk tying up almost $1bn of retiree funds amid allegations of fraud and high-risk investments.
Super Members Council chief Misha Schubert said allowing the government to tap the regulated super fund sector would “escalate the moral hazard” from the scandals, forcing “everyday Australians” to pay for the losses.
Instead of tapping funds, Ms Schubert said, the government could look on a short-term basis to use cash held in the lost and unclaimed super balances.
The CSLR can provide up to $150,000 compensation to eligible consumers, having paid out $72m to 623 Australians so far.
But the Shield and First Guardian scandals could lead to another 5800 investors being added to the pool. The CSLR last week noted it was facing “too many uncertainties” around the scandals’ potential impact amid current funding of $137.5m for just 912 claims.
“It’s a ‘line in the sand’ moment,” Ms Schubert said. “You’ve got millions of Australians at the heart of the super system who are paying for the cost of really strong regulation. They’re being asked essentially to pay twice, for the compensation out of matters that happened in a completely unrelated part of the system.”
Most super funds are held to their own Operational Risk Financial Requirements and must maintain risk reserves and meet liquidity and governance requirements.
The Super Members Council warns that allowing the CSLR to tap funds would also counter the need for standards to be boosted across the sector, with risky operators knowing others will pick up their losses.
“Mainstream super funds already have their own strong operations risk requirements,” Ms Schubert said.
The Australian Taxation Office revealed almost $18.9bn in lost and unclaimed super in 2025, with $12.7bn sitting in the hands of super funds. Ms Schubert said the cash in this pot, where all options to return it had been “thoroughly exhausted”, could be used to bolster the CSLR.
The Super Members Council floated this proposal in a recent Treasury consultation.
The CSLR is currently bankrolled largely by the personal financial advice sector, which will face a $126.9m levy in the 2027 financial year, with the remaining $10.7m to come from credit provision, credit intermediation, and securities dealing operators.
Ms Schubert said using unclaimed super wasn’t a long-term solution and work was needed to reform the self-managed super fund system and stop consumers switching their retirement savings into risky and unregulated options. She said the changes should include tightening anti-hawking provisions, blocking the operators who were responsible for spruiking the Shield and First Guardian funds to investors.
Ms Schubert said the Australian Securities & Investments Commission should also reissue guidance around the minimum size of an SMSF as well as refresh its Investing Between the Flags guidance. She also backed ASIC chair Joe Longo’s proposal to put a cooling-off period around moving money from regulated to less-regulated parts of the retirement sector.
“We think the door should be shut to consumer harm going forward,” Ms Schubert said. “The clear way of ensuring consumers have all those protections is by strengthening the consumer protections across the system.”
Assistant Treasurer Daniel Mulino said the government would make an announcement on the FY2026 Special Levy “in due course”. “We are committed to making sure that the levy is distributed in a way that is fair and sustainable,” he said.
The government’s proposal has faced stiff opposition from unions, which last week warned it risked allowing those responsible for the Shield and First Guardian failures to avoid responsibility.
The Australian Council of Trade Unions also pointed the finger at the prudential regulator, warning it had been focused on industry funds and avoided scrutiny of trustee platforms that were key to the scandals.
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Originally published as Superannuation council urges government to use unclaimed funds for victim compensation scheme
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