Fraud compensation leaves SMSFs out in the cold
The collapse of Trio Capital and the subsequent lack of financial assistance for self-managed superannuation funds (SMSFs) has revealed a gaping hole in the compensation safety net for SMSF investors.
This has prompted calls by the Self-Managed Super Fund Professionals’ Association of Australia (SPAA) to set up a compensation scheme, similar to that of large super funds, to cover instances of fraud.
In Tuesday’s announcement, the Minister for Financial Services, Bill Shorten, announced that only funds regulated by the Australian Prudential Regulation Authority (APRA) would be eligible for compensation.
The $55 million of financial assistance will be funded by way of a levy on all APRA-regulated funds, which will then be distributed to the funds whose members require compensation.
But the 690 direct investors, of which 285 are SMSFs, were told they would not be eligible for compensation as there was no compensation scheme set up for these investors.
Instead, they were told to consider contacting the Financial Ombudsman Service.
Shorten was quoted as saying: “If people wish not to operate under those SMSF regulations, they’re free to become members of the APRA funds.”
SPAA chairman Sharyn Long (pictured) acknowledged that SMSF investors had more control than those in large super funds.
“However, this does not mean SMSF members should be forced to turn to a potentially protracted and expensive court process to seek redress in cases of fraud,” Long said.
Small Independent Superannuation Funds Association (SISFA) director Andrew Cullinan said he felt disappointed by the decision to exclude SMSFs from compensation.
“The basis for exclusion seems to be because they have a direct control over their investment base,” he said.
“It’s splitting hairs. People have to invest their superannuation somewhere, whether it is a mainstream fund or a SMSF, so that’s the choice you have to make.”
He said that if the Government made a decision to compensate, it should cover all those involved, regardless of the vehicle they were investing through.
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
