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Every working adult in Australia contributes towards their own retirement savings through Superannuation (or Super). While this scheme is compulsory, Australian labour force participants have great control over how and where to make their contributions. Does any of this matter? Yes, it matters an awful lot and can make quite a big difference in the quality of your retirement once you reach preservation age (retirement). Perhaps one of the biggest questions we get asked is “What is the difference between an industry and a retail super fund?” Usually, there’s an implication embedded in that question, as people want to know which is better. The quick and dirty answer is, well, it depends. Both industry and retail super funds have their advantages and disadvantages, and since you have quite a bit of control over your super, it’s worth exploring each in a little more detail:  What is an Industry Super Fund?
An industry super fund is an investment fund that is run on a not-for-profit basis. The name itself historically came from the fact that these funds used to be available to workers in specific sectors and industries, e.g., healthcare, community services, construction, and hospitality. Quite some years ago, these funds were only available if you worked within one of these sorts of industries, but nowadays, just about any Australian can contribute, no matter their occupation. What has remained consistent through time, however, is that they’ve remained not-for-profit and return all investments to members upon retirement. Under this structure, there’s no profit sharing between shareholders or dividend payouts. Generally, industry supers have had low fees and great long-term performance. AustralianSuper and Australian Retirement Trust are two examples of longstanding industry super funds. AustralianSuper states that it’s not linked to a specific industry, but it’s technically an industry super. What is a Retail Super Fund? A retail super fund is structured on a for-profit basis. The name retail has nothing to do with a shop or cafe, but instead it’s used like with retail investing, e.g. in the stock market, as opposed to institutional trading. These super funds are usually operated by banks and financial institutions in Australia and are treated as a product they offer, which means that they typically have several investment options to choose from and more flexibility. You may even have access to financial advisors for your super, allowing even greater control over your investments. On the other hand, your investments do go to shareholders (only a portion), and fees tend to be higher. In terms of performance, there tends to be a lot more variability since investors have more control over their investments. Number of Investment Options: Differences Another important consideration when comparing super funds is the range of investment options on offer. This determines how much say you have in where your superannuation is actually invested. Industry super funds typically offer a limited menu of investment choices, often built around pre-mixed options like balanced, growth, conservative, or high-growth portfolios, along with a handful of single-asset-class options such as Australian shares, international shares, property, or cash. For most members, this curated selection is more than enough, and it removes the burden of having to actively manage your own portfolio but as the super balance grows does not offer much tailoring of strategies to manage risk. Retail super funds, on the other hand, generally offer a much wider investment menu. It’s not unusual for a retail fund to provide hundreds of options, including a broad range of managed funds, exchange-traded funds (ETFs), and in some cases direct shares, term deposits, and listed property. This level of choice can be a significant advantage if you want to tailor your portfolio more precisely, or if you’re working with a financial adviser who wants flexibility to construct a specific investment strategy on your behalf. The right number of investment options really comes down to how engaged you want to be with your super and whether you have the time and knowledge. Typically this occurs as we head towards retirement with increasing balances but this should be reviewed regularly to ensure you are always managing risk, fees with investment options. Transparency of Reporting: Differences Knowing what’s happening with your super shouldn’t feel like reading between the lines of a complicated bank statement. Transparency of reporting, that is, how clearly your fund tells you about fees, performance, and where your money is invested, is one of the most underrated factors when comparing industry and retail super funds. Industry super funds have generally built a strong reputation for straightforward, member-focused reporting. The challenge, however, for many is the frequency of updating, and the majority of funds do not allow independent review of their results through third-party research firms like MorningStar and Lonsec. Retail super funds can also offer detailed, comprehensive reporting, sometimes more granular than what you’ll see from an industry fund, particularly if you’re using a wrap-style or platform product that lets you see individual holdings and transactions. Many available investment options open up their financials to third-party research firms, allowing for greater transparency in reporting. It’s also worth remembering that all APRA-regulated super funds in Australia are required to publish key information through Product Disclosure Statements (PDS) and annual member outcomes assessments, so a baseline level of transparency exists across both fund types. The real question is how easy your fund makes it to actually use that information. Before choosing or staying with a fund, it’s worth logging into the member portal, reviewing a sample statement, and asking yourself whether you can clearly see what you’re paying, what you’re earning, what you’re invested in and lastly if you;re taking the word of the fund itself or able to check through third party. What’s Better for You: Industry or Retail Super Fund? Many Australian workers have a “set and forget” attitude towards their super. While it’s better that they’re making contributions (or their employers are on their behalf) than not at all, it’s always wise to regularly check in on your super and to shop around to ask yourself “Can I be Doing Better”? Industry funds are quite straightforward and tend to offer two great advantages: low fees and high performance in the long term. Retail funds offer far more flexibility, which is ideal if you plan to adjust your contributions over the years and get more involved with growing your super balance. The best solution, therefore, largely depends on what you intend to get from your super and your financial situation. All of this can be discussed in finer detail with a wealth management firm, which can offer you bespoke solutions that can give you a much more comfortable retirement. Davlin Wealth Management Discuss your super with us at Davlin Wealth Management. Comments are closed.
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