Super members to face higher levy under new compensation scheme
According to the Super Members Council, the latest funding proposals would add roughly $7.3 million to the compensation obligations of super fund members, moving the burden away from areas more directly linked to financial misconduct. In a paper submitted to Treasury, the council notes that the suggested 2026-27 Compensation Scheme of Last Resort special levy would earmark about $23.8 million for super trustees, instead of the $16.5 million that would have been allocated under previous parameters.
Proposed funding tiers
A new funding model has been proposed, utilizing a three-tiered system to manage expenses exceeding the yearly levy limit. According to the Treasury’s updated plan from September, personal advisory services will contribute an extra $10 million via the initial tier, a decrease from the $20 million specified in April. This special levy contribution is separate from the sector’s $20 million annual levy cap. The second tier would raise $40 million from responsible entities, leaving $120.3 million, or about 71 per cent of the $170.3 million special levy, to be distributed across 21 subsectors through the third tier.
Analysis by the SMC revealed that applying the April parameters to the identical special levy would result in $83.5 million being available for the final tier, thereby decreasing the allocation for super trustees. The council contends that the proposed third-tier methodology relies on routine regulatory engagement and supervisory intensity rather than responsibility for consumer harm or the capacity to prevent it. It warned this could result in larger contributions from firms that engaged proactively with regulators, sought guidance and reported issues, even where those activities had no connection to the misconduct generating compensation claims.
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APRA-regulated profit-to-member funds already provide financial safeguards against failures within the prudentially regulated super system, encompassing operational risk resources and mechanisms for recovering government assistance through sector levies. The council pointed to reimbursements by Macquarie Investment Management Limited and Netwealth as evidence that recoveries could materially reduce compensation costs. It also recommended carrying connected costs above the first two tiers’ caps into later levy periods, rather than immediately distributing them across unrelated sectors.
The council identified Dixon Advisory, United Global Capital, and Shield and First Guardian as accounting for $147 million, or 87 per cent, of 2026–27 compensation costs. It said the largest costs had repeatedly originated from firms directing clients into related-party or high-risk managed investment schemes. Its submission also challenged the treatment of super platforms and master trusts, arguing their investment selection, oversight and accountability arrangements differed.
Cost allocation debate
SMC’s chief executive Misha Schubert said the Government’s latest levy proposal fails the pub test. “Everyday working Australians should not have their retirement savings docked to pay a bigger share of the compensation bill for collapses and misconduct in unrelated, higher-risk parts financial services,” she said. The council acknowledged the burden on reputable advice firms that did not cause the losses, while calling for stronger prevention measures and recoveries from responsible and connected parties before costs were spread more broadly.
