There are a lot of different types of superannuation funds, and many people to not know what the differences between them are. We have compiled this guide to explain the different types of superannuation and details the advantages and disadvantages of each.
MySuper accounts are a new type superannuation account that is a ‘no-frills’ superannuation option. Soon MySuper accounts will become the default superannuation option when an employee has not chosen a super fund. MySuper accounts have low fees and very simple features. Retail, industry and corporate funds can all offer MySuper accounts.
Retail super funds are run for profit, usually by financial institutions or corporate investment firms. Membership is open to the public and people will often be referred to them by them by financial advisors, who may receive fees or commissions for the referral. For this reason you should always do your own research before taking advice to join a retail super fund. Retail super funds are known to have high fees, so you should always consider whether or not your returns will justify these costs.
Industry funds are often restricted to employees from a specific industry, although some of the larger ones are open to the public. Industry funds are non-for-profit, so the fund directs all of the returns back to members. The fees of industry funds vary greatly, so you should make comparisons if you are considering an industry fund.
Public Sector Funds
Public sector funds were established for employees of Federal and State government departments. They are usually only open to governments employees, and generally have low fees and are not-for-profit. Public sector funds may be defined benefit or accumulation funds, although newer members tend to be in accumulation funds.
Corporate funds are organised by employers for their employees. The fund may be operated by larger retail or industry funds, in which case they will take some of the profits , or be operated by the employer under a boards of trustees, in which case they are not-for-profit.
Self-Managed Super Funds (SMSF)
SMSFs are superannuation funds that are managed by their members. An SMSF may have between one and four members, and they allow people to have more control over their investment options. There are also investments that are possible in SMSFs that are not available in public funds, for example; an SMSF may purchase a residential property that will be transferred to the members when they reach pension age. SMSFs can, however, be time consuming and will be more cost effective for some people than others.