Super funds ask for levy exemption
Regulated superannuation funds are increasingly being seen as a ‘honey pot’ and should largely be excluded from the Government’s proposed compensation levy system, according to an industry association.
In a submission on the review of compensation arrangements, the Association of Superannuation Funds of Australia (ASFA) said financial services providers should be segregated into different classes, and only pay a levy where that type of provider is both guilty of misconduct and insolvent.
For example, ASFA said it would be “inappropriate” for superannuation funds to be levied other than where misconduct had caused a superannuation fund to fail.
If a segregated model were to apply, as in the United Kingdom, it might be likely that should a particular class exceed its annual maximum levy threshold, other classes would be required to ‘top-up’ funding.
In this case, ASFA also said it would be inappropriate for superannuation funds to cross-subsidise other financial products, given that super funds represent the deferred salaries and wages of employees.
Further to this, the idea of a universal levy whereby all financial services providers would be liable for the misconduct of others would further result in inequitable outcomes, according to ASFA.
It said this model would mean inherently risky financial services products would be cross-subsidised by less risky ones, especially in the case of prudentially regulated superannuation funds.
Rather, the association stated super funds should only be required to pay a levy if a fund regulated by the Australian Prudential Regulation Authority (APRA) fails and compensation is determined to be payable to members of that fund.
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