Retail or Industry super funds, what is the difference?

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 profits are returned to members, not shareholders. They were originally started by trade unions and employer associations, as a joint enterprise to make sure Australians had money set aside for retirement.

As ‘profit to member’ organisations, industry super funds have historically delivered a higher net benefit to members, as 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.

No super fund (industry or retail) is allowed to make a profit, as technically they’re considered trusts. However, a retail fund can outsource key day-to-day functions to companies within its parent company or the group it owns. These services include administration and investment management – and these sections of the Fund are allowed to make a profit. Profit is then returned to the parent company’s shareholders.

 

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AustralianSuper vs retail super funds

Past performance alone isn’t always the most reliable indicator of future performance. It’s also not the sole factor to look at to see how well a fund performs.

When choosing a super fund or reviewing your current fund, be sure to look at the net benefit. The net benefit is the investment return, after fees and taxes have been deducted.

The table below compares AustralianSuper’s net benefit – for the Balanced option over 5, 10 and 15 years to 30 June 2020 – to the average of all super funds and retail super funds. The totals show what a member with a $50,000 annual salary would have for 5, 10 and 15 years to 30 June 2020, after fees and taxes, in addition to their $50,000 starting balance and employer contributions.

AustralianSuper Balanced option net benefit
net benefit over 5 yrs net benefit over 10 yrs   Net benefit Over 15 yrs
AustralianSuper Balanced option $31,181 $92,361 $153,261
All super funds (average)
AustralianSuper advantage
$23,724
+$7,457
$73,489
+$18,872
$119,582
+$33,679
Retail funds (average)
AustralianSuper advantage
$21,313
+$9,868
$64,437
+$27,924
 $91,824
+$61,437
Net benefit refers to investment earnings to 31 December 2020 (less admin and investment fees). Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

As illustrated, a Balanced option member would have up to $61,437 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.

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

 

Other types of super fund

As discussed, there are 2 main types of super funds: industry funds and retail funds. Others you may hear about include:

 

Corporate funds

These are funds created by a company to provide super 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 super 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. However, you must stick to rigorous regulations, such as setting up an investment strategy and arranging an annual audit by an SMSF regulator. As setup 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

 

  1. Comparisons modelled by SuperRatings, commissioned by AustralianSuper. The outcome shows the average difference in ‘net benefit’, a measure of past investment earnings after administration fees, investment fees and taxes (if applicable) have been taken out. The results compare the AustralianSuper Balanced investment option and comparable balanced options, for historical periods to 30 June 2019. Insurance premiums and other fees and costs may also apply. Outcomes vary between individual funds. See Assumptions for more details.

    Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. AustralianSuper returns before 1 July 2006 are calculated from equivalent options of the ARF and STA super funds.

    Note: the comparison uses data for periods to 30 June 2019. From 1 April 2020, the AustralianSuper administration fee for super (accumulation) account holders increased. See here for more details.

This information may be general financial advice which doesn’t take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898. Investment returns are not guaranteed.

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