Unit 4: What's the difference between super funds?
In Australia, there are around 250 super funds to choose from, but not all funds are the same. They perform differently, offer different options and benefits, and not all funds are available to everyone.
You probably know there are many funds to choose from, and we’ve all seen those ads that show two people side by side to compare ‘Retail’ funds versus ‘Industry’ funds. But what does that all mean?
What are the different categories of funds?
First, let's talk about the super funds themselves. There are four types: industry, public sector, corporate and retail. Industry funds were originally designed for workers of a particular industry. Public sector funds are for government workers. Corporate funds are for employees of a particular company. And retail funds are usually operated by for-profit financial companies like banks and investment banks.
Super funds support different types of people. The most important difference between funds is net performance (basically, how well they manage your money). And the fact is, some funds simply manage investments better than others. Just remember that in most cases, you can choose between super funds.
Can I join any of them? Am I eligible?
Super funds have different membership criteria. For example, you can join any retail fund, and almost any industry fund, even if you don't work in that industry. These are referred to as public offer.
Many corporate and public sector funds are only available if you work for a specific employer. These are referred to as non-public offer.
Are you starting your first job?
When you start a job, your employer will ask you which fund you would like to contribute your super to. If you don't pick one or tell your employer about any super you already have, your employer will select a default fund for you.
If you ever find yourself with savings in more than one fund it may be because when you started a new job, you didn't tell your employer which fund to contribute to. As a result, you may have your super managed by two or more funds. A common misconception is that having multiple accounts is a good way to diversify your super.
Unfortunately, it isn't.
That's because you end up paying more fees than you need to for the exact same services.
What is a Self-Managed Super Fund?
Finally, you may have heard of another option: 'Self-Managed Super Funds' or SMSF. In these funds, you manage your own super savings and have total control over where you want to invest your money. However, setting up your own Self-Managed Super Fund is quite complicated, so we won’t be covering it in these videos. If you’d like to find out more about managing your own super, please talk to your Certified Practising Accountant or licensed financial adviser.
For now, that's the basics on the differences between funds. Whilst funds look after your money, you need to make sure that they are doing a good job. In the next unit, you will learn about how super funds manage your money.