Most Australians have their retirement savings held in whatever super fund their employer uses. For some workers that will be in an industry super fund, and for others it will be an employer-sponsored retail fund.
From July 2005 changes were made to superannuation laws in Australia which allowed workers to choose any super fund they want.
Although this change gave Australians the power to move their retirement saving to any super fund of their choice, many have not done anything and have stayed with the same provider.
If you'd like to take more control over your superannuation, the first step is to learn more about the different types of funds available.
Industry Super Funds
Most of us will have heard about the major industry funds due to their extensive television advertising over many years. These funds also like to sponsor major football teams and other sports.
In years gone by the industry super funds based most of their advertising on the negative portrayal of retail super funds and the commissions they paid to financial advisers. This was a strategy that seemed to work.
More recently, as many retail super funds have ceased paying commissions, and the fact that commissions will be phased out soon anyway, the industry funds have dropped this tactic.
The funny thing is that whilst the industry funds went on about the retail funds spending money on commissions, the industry funds were (and still are) ploughing millions into television advertising and major sporting sponsorship.
For most switched-on Australians, surely they would rather that their money was spent on getting advice rather than spent on advertising...
Industry funds are generally associated with trade unions.
Retail Super Funds
Retail super funds aren't much different to industry funds, but instead of being associated with trade unions they are owned by large banks and insurance companies.
History seems to show that retail funds deliver higher returns in the good times, whilst industry funds generally deliver better returns in the bad times.
A possible reason for this is that industry funds often own large pieces of infrastructure such as toll roads and commercial buildings, which tend to have more stable valations.
Retail funds do pay commissions to financial advisers, so it is worthwhile checking with your adviser to see how much commission they are taking. If they are taking a high percentage of your earning (say more than 1.5%) then you should negotiate a lower rate or consider switching advisers.
SMSF
Another entrant to the mix is the SMSF - Self Managed Super Fund.
SMSFs have been around for quite a while, but they have really flourished over the last decade or so.
An SMSF gives the worker the power to make their own investment decisions, and leaves management of the fund entirely up to them.
This strategy can be very appealing to many workers at first, but there are a lot of important factors to take into account.
Each SMSF must go through an annual audit process as well as lodging a tax return with the ATO. Not only that, but you must also comply with strict rules regarding the types of assets that your super fund can invest in.
Other Funds
There are a number of other types of funds available, including APRA small super funds and private employer funds. Generally however, the main funds most Australians will encounter will by industry funds, retail funds and self managed super funds.
As to which type of fund suits you best really depends on your own personal needs and objectives.
The main things to keep in mind are the simple ones. You want a fund that isn't charging you high fees, or that isn't charging you extra fees for features that you don't need.
You also want a fund that has appropriate investment options to suit your own risk profile. Most funds will have a variety of investment options, so make sure you select the right one to suit you.
Getting your super right is vital to your retirement plans, and the sooner you start the better.
