CSLR Funding Concerns as Special Levy Decision Remains Pending
CSLR Funding Concerns as Special Levy Decision Remains Pending
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The Compensation Scheme of Last Resort (CSLR) recently highlighted potential delays in compensation payments due to insufficient special levy funds.
In July, the CSLR's proposed FY2025-26 levy plan allocated $67.29 million for financial advisers, surpassing the $20 million limit set for the subsector.
This shortfall of $47.29 million prompted the Treasury to initiate a consultation in August to determine funding solutions for the excess levy.
As the consultation phase concludes, the industry awaits Financial Services Minister Daniel Mulino’s decision on funding responsibility. CSLR chief executive David Berry emphasized the urgency of a decision, stating that without special levy funds by November, compensation payments will halt except for pre-CSLR obligations.
Berry noted that even after a ministerial decision, parliamentary approval is required, including a 15-sitting-day disallowance period. The current legislative schedule leaves only 15 sitting days in 2025, making it challenging to receive special levy funds before the new financial year.
He explained that while the CSLR will continue its operational preparations, payments to claimants cannot proceed without the funds. "We have to follow the legislative process, and this requires due diligence," Berry commented, highlighting the lack of quick solutions.
ASIC issued the FY25-26 levy, with the first estimates due in October.
The CSLR is urging the minister to make a timely decision to avoid claimant delays.
Future substantial levies are anticipated as per Berry's insights.
A significant concern among advisers is the possibility of bearing the cost of the special levy. Although this remains an option, other funding solutions are being considered. Berry expressed openness to discussions that ensure the scheme’s sustainability, acknowledging the minister's prerogative in this decision-making process.
Regarding the potential inclusion of certain products in the CSLR to offset costs from product failures, Berry noted this as a complex yet viable path. The assessment of how much responsibility products and advisers should bear remains challenging. He indicated support for such changes should the minister decide to proceed.
The unfolding situation underscores the CSLR's pending financial obligations and the pivotal role ministerial decisions play in shaping future resolutions. With considerable uncertainties ahead, stakeholders are encouraged to stay informed of ongoing developments in the scheme's funding mechanisms.
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Interest Rate Lock: An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage for a specified time period.
