What types of super funds are there?
There are several basic types of super funds:
Corporate funds established by a company or companies to provide super for their employees. Corporate funds are not usually open to the public.
Corporate master trusts rather than running their own fund, some employers use these funds offered by financial institutions. Master trusts are very popular and typically offer accumulation style accounts which mean each member has their own account and receives contributions and investment earnings.
Industry funds these funds were used by an industry or group of related industries to provide super to their employees. They have experienced rapid growth over the past decade and many now have public offer status. They provide accumulation style benefits.
Public sector funds are set up for employees of Federal, State and local governments. They are not usually public offer and can be accumulation, defined benefit or a combination of the two. Defined benefits are paid through a pool of money which receives contributions and investment earnings. However, the members retirement benefit is calculated by a formula and not through investment earnings.
Retail funds are available to the public and are usually run by financial institutions, including familiar brand names in the financial services sector such as AMP and MLC. They offer a broad range of product options and are primarily distributed via financial planners.
Self-managed super funds (SMSF) are established by individuals who want to create and operate their own super fund. SMSFs must have fewer than five members and are a increasingly popular super option. Although you have more control over your super savings, it comes with more responsibility for administration and compliance.
How do I pick a fund?
The Australian Securities and Investment Commissions (ASIC) consumer website, Fido, provides tips on choosing a super fund and recommends that you read the funds 'product disclosure statement which tells you what you need to know for a good comparison of super funds, including:
- fees and costs you'll pay
- death and disability benefits and insurance premiums
- investment strategies you may be able to choose
- objectives of each investment strategy, its risks and likely returns
- fund features and services, including complaint handling procedures
They even provide a super fund comparison spread sheet for you to compare funds.
- Check out the Fido website and click about financial products and then superannuation to learn more about picking a fund.
What risk profile within my fund?
Everyones situation is different. As a general guide, the younger you are, the longer your money will be invested so you can afford to look at growth investments which may fluctuate but provide you with greater returns.
As you get close to retirement age, you may look to invest in more balanced options to protect your assets, even if it means lower returns. Although your age is important in determining your risk profile and investment choice, you must be comfortable with how much risk you are willing to take with your money.
When looking at investment options or classes, speak to your super fund about what works best for you or see your CPA financial planner.
Further information
