Shield and First Guardian collapses spotlight need for Federal Budget to fast-track stronger super protections

The Super Members Council is urging the Australian Government to fast-track and fund a comprehensive package of stronger super consumer protections in the 2026 Budget to safeguard Australians’ life savings.

The Council warns the high-profile collapses of Shield and First Guardian – in which 12,000 Australians lost $1 billion in high-risk products - have shown the need for urgent reforms to strengthen consumer protections and close regulatory gaps to prevent such disasters from happening in the first place.

The package of protections should include a crackdown on aggressive selling of super products through social media ads and cold calling, and stronger safeguards to protect both consumers and advice licencees from potential conduct risks arising from conflicted remuneration.

The latter can be achieved by a comprehensive ASIC review to inform a refresh of its conflicted remuneration guidance and ensure there are no loopholes in this key consumer safety protection.

Such a review should include:

• Ensuring the definition of “conflicted remuneration” covers indirect benefits, not just direct benefits, including any profits or equity interests in related product issuers and platforms.
• Undertaking a comprehensive review of payment arrangements from platforms and product issuers, given the significant evolution of industry models since the last review.
• Improving Financial Services Guide (FSG) disclosures by making any payment relationships clearer. This could include annual disclosure of such relationships, with dollar amounts, on a public register or in mandatory annual reporting.    

The enduring importance of strong consumer safeguards from conflicted renumeration was also highlighted in a key ASIC enforcement action last year, where the regulator alleged an individual had engaged in “unconscionable conduct, failed to act in the best interests of clients, gave conflicted advice, and provided defective statements of advice whilst receiving millions of dollars.”

The Council also proposes a ban on aggressive selling tactics through social media ads and cold calls, by expanding anti-hawking laws to cover any contact aimed at generating or transferring leads for personal financial advice or super.

A strong package of consumer safety measures should come with a reversal of the Government’s decision to force low-income workers in the well-regulated mainstream super system to cover a cost blowout in the Compensation Scheme of Last Resort, while excluding wealthier Australians with self-managed super funds (SMSFs). Yet around 80% of existing claims on the scheme related to advice on SMSFs.

As well as its key focus on strengthening consumer safety in super, the Council’s pre-Budget submission sets out three broader Budget priorities in super:

• Ending discrimination against under-18 workers by scrapping an outdated rule that denies them super if they work fewer than 30 hours a week.
• Simplify the path to retirement by fast-tracking the Delivering Better Financial Advice reforms, enable real-time data sharing between government and super funds, and let retirees be paid super contributions into their retirement phase account to cut duplicate fees.
• Close the gender super gap by indexing the promised lift to the LISTO, remove barriers to women’s workforce participation, boost access to childcare and aged care, and make super splitting fairer and more transparent in non-court divorces, where fewer than a third of couples currently split super.

“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,” says the Council’s CEO Misha Schubert.

“Super is your pay cheque in retirement – so the Government should do everything it can to ensure the safety of life savings and help all working Australians to have the strongest possible retirement.”