No reason to expand CSLR: Hume
The compensation scheme of last resort (CSLR) should not be expanded to cover managed investment schemes or high-risk investments, according to Senator Jane Hume, and would likely make funding it more expensive, not less.
Addressing the Australian Financial Review Super and Wealth summit in Sydney, Hume, minister for superannuation, financial services and the digital economy, told delegates the CSLR should not be expanded to included a broader range of investment types.
“The CSLR is not an insurance designed to pay compensation to any consumer who has lost money in an investment,” Hume said.
“It is only intended to cover unpaid compensation awarded because of misconduct relating to a targeted range of products and services.
“The CSLR will also not cover managed investment schemes or other high-risk financial products.”
Making the CSLR a broad-based scheme would mean higher costs for retirees and mum and dad investors, she said, and give a Government-backed guarantee for Ponzi schemes.
“Everyone who makes sensible, cautious, informed investment decisions would end up having their returns clipped to underwrite people who punt their savings on emu farms or tulips or other too-good-to-be-true high-return, high-risk investments,” Hume said.
“If you want to punt a portion of your savings on something speculative, knock yourself out. No government should stand in your way. But you should be prepared to wear it when it goes wrong.”
For those who had suggested a broad-based scheme would make it less expensive, she said experience in the UK had found its levy was forecast to be over £1 billion ($1.8 billion) a year, less than 10 years since it had been launched and compensation had more than doubled from £243 million in 2013 to £564 million in 2020.
“To those in industry who believe that expanding the scheme will make it less expensive, I say: be careful what you wish for,” she said.
AUTHOR
Laura Dew
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