The main difference between an industry super fund and a retail super fund is how their profits are managed. Retail super funds have a responsibility to shareholders, while industry funds put members first.
Choosing the right super fund should be made with a long-term view, after all, if you start work at 18, you’ll be contributing to your super for over 40 years. There are several types of superannuation funds available. Most people in Australia are with an industry or retail fund. Understanding the differences can help you make a more informed choice.
Industry super funds
Industry super funds are ‘profit to member’ organisations. This means that profits are returned to members, not shareholders. They were originally started by trade unions and employer associations, as a joint enterprise to ensure Australians had money set aside for retirement.
As ‘profit to member’ organisations, industry super funds have historically delivered a higher net benefit to members, (illustrated in the chart below). These days, most industry super funds are open to the public, although some are linked to particular industries.
AustralianSuper is an industry super fund, and is Australia’s largest super fund, with over 2 million members. The Fund isn’t linked to any specific industry, which means anyone working in Australia can join, whatever you do for a job.
Retail super funds
Retail super funds are commonly run by financial institutions, such as banks, and wealth management companies.
While no super fund – industry or retail - is allowed to make a profit (as technically they’re considered trusts), a retail fund can outsource key day-to-day functions to companies within its parent company or the group that it owns. These services include administration and investment management – and these sections of the Fund are allowed to make a profit. Profit is them returned to the parent company’s shareholders.
Other types of super fund
There are 3 main types of superannuation funds, including industry funds and retail funds. Others you may hear about are:
These are funds created by a company to provide superannuation for their employees. Once quite common, many have now closed.
Public sector funds
Created for employees of a Federal or State government, most public sector funds are only open to government employees.
Self-Managed Super Funds (SMSFs)
SMSFs are private superannuation funds that are regulated by the Australian Tax Office (ATO) and managed by individuals, called trustees, for up to 4 members. Anyone can run their own SMSF, but they must stick to rigorous regulations, such as setting up an investment strategy and arranging an annual audit by an SMSF regulator. As set-up and running costs can be high, SMSFs are typically most cost-effective for individuals with large balances.READ MORE: SMSF WHAT YOU NEED TO CONSIDER
AustralianSuper vs retail super funds
Past performance alone is not always the most reliable indicator of future performance, nor is it the sole factor to look at to see how well a fund performs.
When choosing a super fund or reviewing your currant fund, be sure to look at looking the net benefit. The net benefit is the investment return, after fees and taxes have been deducted.
AustralianSuper’s net benefit for the Balanced option over 5, 10 and 15 years to 30 June 2019, is compared against the average of all super funds and retail super funds in the graph below. The totals show what a member with a $50,000 annual salary would have for 5, 10 and 15 years to 30 June 2019, after fees and taxes, in addition to their $50,000 starting balance and employer contributions.
Accumulation - Balanced Option
|net benefit over 5 yrs||net benefit over 10 yrs||Net benefit Over 15 yrs|
|AustralianSuper Balanced option||$33,610||$103,386||$175,365|
|All super funds (average)
|Retail funds (average)
As you can see, an AustralianSuper Balanced option member would have up to $63,394 more in their super (over 15 years), compared to the average retail super fund.
If the same member had been with AustralianSuper for only the previous 5 or 10 years, the net benefit would also be higher relative to averages for all super funds and retail super funds.Net benefit and why its important to your super
See how AustralianSuper compares with Chant West’s Super AppleCheck
Compare super funds side-by-side using the Super AppleCheck comparison tool. It’s free to use and provided by independent superannuation research firm Chant West. You can compare industry and retail super funds with AustralianSuper on an ‘apples-to-apples’ basis that covers investments, fees, insurance and member services.APPLECHECK - SUPER COMPARISON TOOL