There are many types of superannuation funds, with well over 500 super companies operating in the marketplace today. Dissecting that further, superannuation can be broken down into the following main sectors; Industry and Retail funds, Public Sector Funds, Corporate Funds and Self-managed Super Funds. A brief description of the main sectors are below:
Industry Superfunds
Industry Superfunds started in the 1980s as an alternative for Australian workers from the high fee products in the retail superannuation market. They are generally a lower fee fund, intended to run only to profit their members and don’t pay commissions to financial planners or advisers.
There are currently 16 Industry Superfunds in Australia, and are open for anyone to join.
Retail Superfunds
Retail Superfunds are intended to generate corporate profits, which are returned as dividends to shareholders, not the superannuation funds members. Up until recently many of the biggest Retail Superfunds have been owned by the banks but the recent Royal Commission into the financial sector has resulted in many banks separating their investment and advice companies which included Retail Superfunds. There will often be hundreds of investment options to choose from, which can be daunting for the novice investor.
Self-Managed Super Funds (SMSF)
Over the last decade, the growth of self-managed super funds has been steadily increasing – so much so that it is now clearly the largest and fastest growing segment of superannuation, with approximately 32% of all funds belonging in this category.
Self-managed Super Funds only cater for up to 4 members which can provide a more personalized service, unlike many retail or industry funds, which can cater for thousands of members at a time. Some advantages of a SMSF include:
- Ability to purchase property through the fund
- Greater Control – You have complete control over what investments are entered into and retain ownership over all the assets held in the fund.
- Tax Concessions – Possibility of greater tax concessions compared with retail or industry funds.
- Personalized service to ensure your financial goals are met and monitored.
The members, as trustees of the fund, make all the decisions on how the fund operates, which investments are entered into as well as the type of benefits it pays. With this greater control, also comes greater responsibility, and the trustees are required to comply with all relevant laws and reporting duties to the taxation department.