Australia’s AUD 4.4 Trillion Superannuation System Under Scrutiny
Following the collapse of two major managed investment schemes and a surge in members moving to self-managed funds, Australia’s superannuation system is facing its most intense regulatory review in years.
Collapses and Investor Impact
The Shield Master Fund and First Guardian Master Fund, both classified as managed investment schemes, collapsed between 2024 and 2025, affecting approximately 12,000 investors with total losses exceeding AUD 1 billion.
- First Guardian Master Fund: Liquidators have recovered only AUD 1.6 million of the AUD 446 million invested, as of December 2025.
- Shield Master Fund: Investors are expected to recover at least 50% of their capital.
ASIC has commenced legal action against entities involved in overseeing the funds, including Equity Trustees, which has stated it will defend itself. Two other trustees—Macquarie and Netwealth—have committed to compensating investors, reportedly reimbursing AUD 422 million.
Former Venture Egg adviser Nicholas Hogan received a four-year industry ban from ASIC for impersonating other advisers and misleading clients.
Venture Egg, an advice firm, directed approximately AUD 415 million from nearly 6,000 clients into the collapsed schemes. Its licensee, InterPrac Financial Planning, is under investigation. Sequoia Financial, InterPrac’s parent company, has denied allegations of failing to address red flags raised by internal audits.
Regulatory Gaps and Government Reform Proposals
Officials have identified critical gaps in oversight. Incoming ASIC chair Sarah Court characterized the scale of misconduct as "industrial-scale." Assistant Treasurer Daniel Mulino stated that reforms are necessary to prevent future collapses and address erosion of public confidence.
The federal government has released a Treasury consultation paper (closing February 27) proposing several measures:
- Requiring superannuation funds to report suspicious member switching patterns to ASIC.
- Banning managed investment scheme managers from conducting related-party transactions with investor funds.
- Strengthening compliance and risk management requirements for scheme operators.
- Implementing stricter auditing standards.
- Mandating independent directors form a majority on scheme governing boards.
- Considering higher capital requirements for scheme operators.
- Granting ASIC enhanced powers to demand information.
The government has also committed to introducing mandatory and enforceable service standards for the superannuation industry, including member communications and claims handling, with draft legislation expected later in 2025.
ASIC’s Intensified Review of Lead Generation and Platform Oversight
ASIC has launched a review of lead generation practices, following reports that consumers were contacted via unsolicited calls and social media advertisements to switch from regulated superannuation funds into managed investment schemes. ASIC has commenced legal proceedings against one lead generation firm, Imperial Capital Group.
In a separate 29-page report examining six platform trustees overseeing AUD 300 billion in retirement savings, ASIC found that trustees failed to adequately monitor:
- Advice fee deductions.
- Unusual fee patterns and investment flows.
- High-risk switching activity.
ASIC Commissioner Simone Constant noted persistent gaps in advice fee controls, limited verification of advice documents, and insufficient monitoring of risk indicators such as member churn and unusual fund flows.
ASIC has emphasized that all financial advice in Australia must prioritize the client’s best interests.
Surge in Switching to Self-Managed Funds and Platforms
The Super Members Council (SMC) reported a 17% increase over the past year in members switching from APRA-regulated funds to platform-based products and SMSFs.
Key findings from SMC data:
- Approximately 70% of those switching into platform-based funds in 2024–2025 had superannuation balances under AUD 100,000.
- 80% had balances under AUD 200,000.
- Similar patterns were observed for switches to SMSFs.
SMC CEO Misha Schubert stated that younger Australians with lower balances now constitute a significant portion of those switching. The SMC estimated that members switching to platforms and SMSFs face over AUD 160 million in additional annual fees and costs.
Importantly, 70% of those switching did not have a pre-existing advisory relationship with the person influencing their move, suggesting influence from social media, lead generation, or third-party sources.
Consumer Protection and Complaint Mechanisms
The Australian Financial Complaints Authority (AFCA) reported an increase in superannuation complaints, with member service issues cited as a primary concern. Of the approximately 12,000 Australians affected by the collapsed schemes, only around 2,000 complaints had been lodged as of the latest reporting period. AFCA has delayed expelling collapsed firms to allow more investors to seek redress.
TelstraSuper Closes Direct Access Product
TelstraSuper, an independent fund with approximately 87,000 members, closed its Direct Access investment product in late 2025, requiring 720 members to sell their assets within two months. The fund stated the closure followed a comprehensive review as part of its merger planning with Aware Super.
The fund had updated its terms and conditions 18 months prior, allowing it to close the option with 30 days’ notice. The change in terms was communicated via a pop-up window that members had to accept to access their accounts.
Member Lauren Castles stated she was not aware of the changed terms until she filed an internal complaint, and reported financial losses from selling shares during the Christmas period due to market fluctuations. She has lodged a formal complaint with AFCA.
Super Consumers Australia policy director Jess Spence criticized the use of a pop-up window for communicating significant changes. Superannuation lawyer Rod Hodgson noted that funds are required to act fairly and reasonably in member communication, and suggested that if TelstraSuper’s policy mandated email notification and this was not followed, it could raise questions about fairness.
ASIC’s guidance states that funds have an ongoing obligation to disclose material changes in a timely, meaningful, and easily understood manner.