The concept of superannuation can be tricky to understand at the best of times. However, to make things more complicated, there are several different types of superannuation funds, with distinct features and intricacies.
This blog will simply provide a quick overview of some of the different types of funds. If you’re interested in exploring which type of fund is best for you, we recommend you seek legal and/or financial advice.
The main types of fund include:
- Employer/corporate funds
- Personal funds
- Industry funds
- Retail funds
- Self-managed super funds (SMSF)
As the name suggests these are specific funds established by individual employers for their staff. Some larger employer funds appoint a Board of Trustees to assist with the management of the fund. All profits from this type of fund generally return to the members rather than some of the profits retained by the fund itself for development or another future use.
This is a type of fund where an individual personally joins through a superannuation provider. There are many of these types of funds available in Australia and they generally offer a wide range of options regarding investment choices, insurance and income protection options.
In the past, industry funds were designed to meet the needs of employees working in a particular industry; for example, the construction industry, banking & finance or healthcare workers.
But has time has progressed, more and more of these industry funds have become accessible to the general public. In other words, you may now be able to join a construction industry super fund even though you do not actually work in the construction industry.
However, some industry funds do indeed limit their members to those who work in that particular industry. Industry funds are the type of fund you might commonly see advertised on television or elsewhere. Some of them may have a smaller amount of investment options and less products to choose from however, fees and charges are usually much less than other types of funds.
These are generally run by investment companies or banks. There is usually no restriction on who can join and they tend to have a very large number of investment options. These funds are usually ‘accumulation funds’ where the money/investment accumulates and grows over time. An accumulation fund is distinct from a ‘defined benefits scheme’ which won’t be discussed in this blog.
Self-managed super funds (SFMS)
These are generally established by people with a greater superannuation fund balance. These individuals tend to want more flexibility to manage and control the investment of their funds in an attempt to maximise their investment growth.
SMSFs can be set up to include different options and benefits including life insurance and disability support. People who establish a SMSF would generally be expected to have a fairly good understanding of the superannuation scheme, the share market, investment options, etc. A SMSF can actually have up to 5 members as part of the same fund.
There are also other specific types of super funds including Public Sector funds for state or federal public servants as well as ‘eligible rollover funds’ and other types.
Choosing the right type of fund for you may not be an easy decision, and making the wrong choice for your personal circumstances may have adverse consequences regarding your standard of living at the time of retirement.
Again, we recommend, if you’re unsure of the type of super fund you should choose, you should seek advice from someone experienced in superannuation.
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