There are many types of super funds, each being a bit different. Knowing the different types of funds will make it easier for you to choose a fund. Super funds can be grouped into a number of categories and they can be as follow:
Retail Funds are usually run by banks or investment companies. The main features of retail funds are as follow:
- Anyone can join.
- They often have a large number of investments options, sometimes in the hundreds.
- They are usually recommended by financial advisers who may be paid for the advice by fees and/ or a commission.
- They are accumulation funds.
- Most retail funds range from mid to high cost, but some are now offering a low cost or MySuper alternative.
- The company that owns the fund aims to retain some profit.
The larger Industry Super funds are open for anyone to join. Some others are restricted to employees in a particular industry. The main features of an industry fund are:
- They usually have 5-15 investment options, which will meet most people’s needs.
- Most funds are accumulation funds. A few older funds still have defined benefit members.
- They are generally low to mid cost funds although some have high fees.
- Some offer MySuper accounts.
- They are ‘not for profit’ funds which means all profits are put back into the fund for the benefit of all members.
Or, you can set up your own private Super Fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO).
An SMSF can have between one to four members. Each member is a trustee (or director if there is a corporate trustee).
When you run your own SMSF you must:
- Carry out the role of trustee or director, which imposes important legal duties on you.
- Use the money only to provide retirement benefits.
- Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs.
- Keep comprehensive records and arrange an annual audit by an approved SMSF auditor.
Therefore, how does one choose the right Super Fund?
An Article written by Roy Morgan explains that satisfaction with the financial performance of superannuation in the six months to May 2014 was 55.1%, up 7.2% points since May 2013. Self-Managed Super Funds (75.6%) remain the clear leader, followed by Industry Funds (55.8%) and Retail Funds (53.7%). These are the latest findings from the May 2014 Roy Morgan Research ‘Superannuation Satisfaction’ report based on over 30 000 interviews with people per annum with Superannuation.
Norman Morris says:
“With the expansion of the SMSF sector, satisfaction with financial performance is increasingly a factor that fund managers should be taking notice of. It appears that satisfaction with superannuation has a lot to do with the amount in super and the consequential level of engagement.”
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