Australia's $4.5 trillion super industry warned over inadequate safeguards

Australia's corporate regulator has placed the nation's massive $4.5 trillion superannuation industry on notice, highlighting a "troubling" lack of safeguards for retirement savings.

The Australian Securities and Investments Commission (ASIC) is concerned that super trustees are failing to adequately monitor potentially harmful advice fee deductions, unusual fee structures, and risky investment patterns. They are also failing to track high-risk switching activity within superannuation accounts. ASIC Commissioner Simone Constant stressed the urgency for trustees to conduct immediate reviews and identify areas for improvement before risks lead to significant harm to Australians' hard-earned retirement funds.

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All superannuation trustees should immediately review and consider areas for improvement before risks translate to serious harms for Australians and their hard-earned retirement savings.

This directive comes in the wake of significant collapses, including Shield and First Guardian, which resulted in more than 11,000 Australians losing approximately $1 billion in retirement savings. ASIC's concerns are based on a detailed 29-page report titled "Safeguarding super: How well are platform trustees monitoring risks to retirement savings."

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Our message is trustees do your job. Keep the money safe, ensure there's value for money.

ASIC's review of six platform trustees, overseeing about three-quarters of total funds managed by such entities ($300 billion), identified several critical areas needing immediate attention. These include persistent gaps in advice fee controls, with some trustees proposing fee caps far exceeding regulatory recommendations. The report also noted that half of the reviewed trustees conducted no checks on advice documents for at least one month during the review period.

Furthermore, ASIC wants trustees to improve their understanding of advice licensees' business models, particularly regarding the use of lead generators or third-party referral sources. Inadequate monitoring of key risk indicators, such as member churn, fee patterns, holding limits, and unusual fund flows, was also flagged. "Our message is trustees do your job. Keep the money safe, ensure there's value for money," Ms. Constant stated, also encouraging Australians to actively engage with their superannuation accounts.

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Our message though is also to Australians, superannuation is so important to almost every working Australian now, that we're encouraging Australians, engage with your super like you do with your banks.