That’s a matter of personal opinion, but we can tell you how they differ. Industry funds and retail funds differ in their history and structure. They can be likened in some ways to credit unions and banks. Here’s a brief rundown of some of the points which set them apart.
What types of super funds are there? What’s the difference?
Superannuation is a tax structure set up for the purpose of helping Australians save for their retirement. Within that tax structure there are various different types of superannuation funds, including:
- Corporate or public sector funds
- Industry Super Funds
- Retail Super Funds
- Self-managed super funds (commonly shortened to SMSFs)
5 Star Rated Superannuation Funds
If you’re considering outstanding value superannuation funds, check out the table below which displays a snapshot of 5-Star superannuation funds, both industry and retail, on Canstar for Australians aged 30-39, sorted by provider name (alphabetically). Use Canstar’s superannuation comparison selector for a wider selection of super funds tailored to your preferences. Check upfront with the provider and read the PDS to confirm whether any particular super product meets your needs before committing to it.
What Are Industry & Retail Super Funds?
The main difference between retail and industry superannuation funds is what they do with their profits. Retail super funds return their profits to shareholders and investors whereas industry super funds generally return profits to their members. See below for more differences between industry and retail super funds.
Retail Super funds
Retail super funds were developed by financial institutions and insurance companies to cater for people who were interested in investing and saving for their retirement. It’s fair to say the initial focus of these funds were wealthier white collar customers, typically in management positions.
Retail super funds offer investment expertise and personal service to their clients and charge a commission for that service. The shareholders of these publicly-listed companies expect to receive a return on their investment, and a portion the profits derived from the activities of retail super funds goes to the shareholders.
Large organisations such as banks and insurance companies tend to run Retail super funds. Retail super funds include, for example:
- AMP Flexible Super
- Bendigo Smart Start Super (Bendigo Bank)
- BT Super For Life (Westpac)
- ING DIRECT Living Super (ING DIRECT)
- MLC Masterkey Super (NAB)
- Colonial First State (Commonwealth Bank)
- OnePath (ANZ Bank)
- Suncorp Everyday Super (Suncorp)
Retail superannuation funds have also historically tended to offer a number of insurance options beyond or instead of the “default” product. Members are often able to specify the level of insurance cover they require for death, TPD or income protection. Insurance cover is normally subject to some form of medical assessment, and this can mean a more appropriate level of cover for your individual situation rather than the one-size-fits-all approach.
In response trade unions argued that a comfortable retirement should be available to all workers not just management.
Industry Super Funds
Industry superannuation funds were predominantly developed by trade union and industry bodies to provide for their members in retirement. Originally the various super funds were exclusive to their industry but super choices have opened most of them up to anyone eligible for superannuation. This is where the term “public offer” originated –industry funds are now open to the general public and no longer restricted to their industry.
Industry funds are not- for-profit organisations. Some of the best-known industry super funds include:
- REST Industry Super
- MTAA Super
- LUCRF Super
- Cbus Super
- HESTA and more
Industry funds are not-for-profit funds; as a result they have historically charged lower fees on average compared to the big retail super funds, and profits are funnelled back into members’ funds. However this is changing. Some retail funds are now challenging this paradigm by introducing new low-cost products.
Superannuation itself is just a tax structure. It’s the investments that you choose to put your money into within your superannuation fund – whether you choose to invest in cash, property, shares, bonds or a mixture of everything – that will help determine how much money your superannuation investment earns. Some superannuation advice from a licensed advisor is a great idea!
So when it comes to investment options, retail funds tend historically offered a much greater range of investments. This has changed significantly in recent years though, with many industry funds also offering a very wide range of available investments. For example, AustralianSuper now offers a member direct platform in addition to the more traditional investment options.
What about superannuation fees?
The great debate in the media at the moment is around fees. Industry funds will tell you they don’t pay any commissions to financial advisers. And let’s face it the lower the fees the more money goes in your account and the better off you will be. However, as the old saying goes, there are always two sides to every argument. The other side of the argument is if you get good superannuation advice and invest in the right option you can potentially be better off in the long run – even if you do pay fees to your financial adviser. And there are ways to minimise the fees and commissions you pay. Here’s some more info on the costs and types of superannuation fees.
Superannuation advice on choosing industry or retail
When it comes to advice, retail funds generally have a much stronger focus on promoting advice services and providing advice through their own adviser channels or arrangements with an adviser network. This is no surprise given their history. We surveyed 1,100 superannuation account holders and asked who had obtained financial advice in the last 12 months. Overwhelmingly retail fund customers had a higher percentage of customers who had obtained financial advice in the last 12 months by a ratio of more than 2 to 1.
In a game of swings and roundabouts, the lines between Retail and Industry funds are starting to blur. We are now seeing investment options increasing in some Industry funds with more offering the option of more tailored insurance cover. On the other hand, we are also seeing some Retail funds challenging their Industry competition by introducing new, low-cost products. One thing’s for sure, it won’t be the last of the changes and growth we see in this area.
When evaluating the merit of super funds, many can’t go past the investment returns made by each. However it’s a mistake to chase the top fund on last year’s league table. History shows us that no single fund stayed at the top of the rankings across one, five and ten-year periods. Equally, the biggest funds – Retail or Industry – didn’t always score the top returns.
A more sensible approach is to keep an eye on your fund’s performance regularly, at least every year. Don’t be too concerned if it underperforms in the short term, but if it consistently underperforms over a few years, try to find out why and maybe look at some alternatives. Many funds now offer advice for little or no charge and conveniently over the phone, so before making an investment switch consider getting advice.
Learn more about Super
- What does all the Superannuation terminology mean?
- I have insurance in super – do I need more?
- How to read your Superannuation statement