While borrowing can be a useful tool for increasing retirement savings, it can also “compound and magnify” losses where investments go wrong, the response stated.

“Not withstanding that a number of funds have already engaged in these arrangements, it is not too late to reconsider policy in this area,” CAANZ said.

“We reject the argument that a review is not needed on the basis that borrowing is not a significant problem with the super industry, particularly with SMSFs, due to its relatively low levels of take-up.

“In fact, we consider this highlights the timeliness of a review to determine whether borrowing is appropriate or not before it becomes widespread, potentially impacting on funding, housing and security of retirement savings.”

CAANZ said should a decision be taken to ban borrowing, it would need to be on a prospective basis, with existing arrangements being grandfathered.

If the FSI determines that borrowing can continue in super, CAANZ recommends a review of the regulatory and legislative framework that supports it.

“Currently, the legislation is difficult to navigate, with breaches of super law occurring too frequently,” CAANZ said.