Additional consumer safeguards are needed to protect Australians’ super savings following the collapse of Shield and First Guardian, according to the Super Members Council (SMC), which says it wants to work with other system stakeholders “in good faith” to design and implement them.

The collapse of the two funds has left $1.2 billion of retirement savings of 12,000 people up in the air, with the SMC saying in a release that it had “laid bare” the scale of serious consumer risks when Australians are urged to switch their super out of the mainstream super system.

“The social licence of the whole system relies on strong trust in super and strong trust in good advice – and Australians rightly expect there to be strong uniform consumer protections across the entire system,” said SMC CEO chief executive Misha Schubert.

“The collapses of Shield and First Guardian show the current consumer protections are not uniform enough – and we all have a responsibility to work together to ensure they are.”

The SMC said that it supports ASIC chair Joe Longo’s call for stronger consumer protections, including cooling off periods.

A package of broader reforms could also include expanding anti-hawking laws to deal with social media lead-generation, click through ads and online funnels that “replicate pressure-sales environments”; closing consumer protection gaps in governance, accountability and regulator supervision across super and investment platforms; and reintroducing ASIC’s  “investing between the flags” initiative and having official alerts when consumers are about to move outside system safeguards.

“Many Australians are vulnerable to tactics that encourage them to switch their super into options that are more expensive, risky or not in their best interests,” Schubert said.

“We need a system that universally prevents consumer harm.”

The SMC echoed Longo’s speech at the National Press Club last week, where he warned that a “switching catastrophe started with ordinary Australians moving their super from a relatively safe environment to an unsafe environment.”

“We are seeing more and more people risking their retirement savings because they’ve been led to believe their current fund is underperforming and persuaded to seek higher returns somewhere else,” Longo said.

ASIC shut down the funds due to concerns over misuse of investor money, including spending on luxury personal expenses and inappropriate investments into the pet projects of the fund’s directors.

It is also alleged the funds were paying advice firms to market the funds via lead generators who funnelled clients into the products without considering their best interests or their individual needs and circumstances.

Misha Schubert will appear at the Advice Policy Summit, to be held on 23-24 February at the National Press Club in Canberra.