Note: We regularly update this article with the latest data on superannuation funds issued by the Australian Prudential Regulation Authority (APRA). This article contains the latest data available as of January 2015 (for data as at September 2014).
Unless you work in the superannuation industry, how the world of super works can be bamboozling (sometimes it can be confusing even when you know the industry well). This article, on the different types of super funds, helps explains the main players in the Australian super world.
This article should really be titled ‘The what’s what in the super zoo’ because I’m explaining the different types of super funds available, rather than the people involved.
You may find this difficult to believe but there are only 5 types of super funds in Australia, and most Australians can only choose from 3 of these fund types. You can expect to find the following five broad types of super funds:
- Company (or corporate) funds
- Industry funds
- Retail funds (although you may be offered a series of funds via a ‘wrap’)
- Public sector funds (also known as public sector schemes)
- Small funds (two-types: self-managed super funds and small APRA funds. APRA stands for the Australian Prudential Regulation Authority, the main super regulator)
You can also choose a Retirement Saving Account, which is a bank-savings-account- style of super product. Also, if you have lost track of your super, your retirement savings may have been transferred to an Eligible Rollover Fund.
Let’s deal with the big numbers first. Based on statistics released in November 2014, there were 542,468 super funds in Australia as at September 2014, and 542,065 of these super funds were small funds (super funds with fewer than 5 members). Nearly all small funds are self-managed super funds (SMSFs) (539,375 commonly known as DIY super funds, and 2,690 of small funds are small APRA funds).
Another 155 super entities cover eligible rollover funds (14), approved deposit funds (57), pooled superannuation trusts (54), Retirement Savings Accounts (10) and exempt schemes (20).
What all of these number means is that if you considering one of the remaining four categories of super fund – corporate, industry, retail, public sector – then you have only 275 super funds to consider. Okay, that is still a lot of super funds, but if we break it down into the individual categories (see table below), the super world looks a little less daunting.
Briefly, the following are the four types of managed superannuation fund:
- Industry fund. An industry fund usually caters for workers from a particular industry but many of them are now available to anyone. There are roughly about 45 industry funds.
- Company/corporate fund. A company or corporate fund is generally a super fund with membership only open to employees working for that company. You can’t choose a company fund but you may choose to remain in a company fund, if you’re an employee of the company and an existing fund member. Some company funds permit relatives of existing members to join too. There are roughly about 80 corporate super funds.
- Public sector fund. A public sector fund is only available to public sector (government) employees and, in some cases, ex-public sector employees. You can’t choose a public sector fund although some of them let you choose to remain a contributing member when you leave the public sector – in these circumstances you may be able to arrange for your new employer to contribute to your public sector fund. There are about 35 public sector funds.
- Retail fund or master trust. Financial institutions such as banks, financial planning groups and fund managers run retail super funds. Anyone can join these types of funds. You may be a member of a retail fund if your employer pays your Superannuation Guarantee (SG) contributions into a corporate master trust. A corporate master trust is just like a master trust for individuals but on a much larger scale. There are roughly about 110 retail super funds.
If you visit a financial adviser you may also hear the terms ‘super wrap’ and ‘master trust’. These two categories generally offer you access to lots of managed fund investments, and fall under the category of ‘retail funds’.
As mentioned earlier, you can also consider opening a Retirement Savings Account (RSA): you can choose from 10 RSAs. An RSA is a low-risk and low-return superannuation account provided by banks and other financial organisations. RSAs, however, are more a parking vehicle rather than a long-term investment option. RSAs represent one-tenth of a mere 1 per cent of all money invested in the superannuation market.
Note: Unless you’re already a member of a company fund (although some company super funds permit relatives of employees to become members) or, already a member of a public sector fund, an employee can generally only choose from three types of super funds:
- Industry funds
- Retail funds
- DIY super funds (SMSFs).