Q: I know that industry super funds generally have a good performance – particularly because of low fees, but I wondered, what is the benefit of picking one for your particular industry? I understand how people in some industries may have similar needs but is that really true these days in terms of the distinct benefits that an industry fund offers? For instance if I work in media, why would Media Super be better for me than say Legal Super. And are there restrictions on which ones you can join? Can I pick an industry fund that I don’t work in if it has a better performance?
Before I answer your question, I just want to flag that low fees are just one element in the long-term performance of a super account, although industry super funds have performed well over the long-term on average, relative to retail super funds. More recently, the performance of industry super funds has suffered due to the generally higher allocation towards unlisted assets, which have not performed so well. Note that each industry super fund does invest differently. I write elsewhere on the site about
The reason for having different industry super funds for particular industries is really an historical issue.
In the mid-1980s when productivity superannuation (predecessor of the Superannuation Guarantee (SG) system) was first introduced, each industry negotiated awards over time that included 3% productivity super and each award stipulated where that money was to be paid. For example, the building industry has Cbus, the health industry has HESTA (and Health Super), the retail industry has REST, and the list goes on. The original names of these super funds were long-winded but as time has passed and the marketing strategies of these super funds has become more sophisticated, each super fund has shortened the fund name to something that you can remember.
Check insurance cover
Apart from investment performance (see earlier), and recently, different
Large super funds negotiate group cover on the basis of the profile of its fund membership, and some industries are more dangerous than others which generally means that the premiums on offer will be different, depending on the type of industry. Many industry funds are now offering an ‘office’ or ‘professional’ category for those fund members in low-risk categories.
Can I join any industry fund?
If you have the right to choose your own super fund (for the purposes of your employer’s Superannuation Guarantee contributions), then you can choose any fund you wish, assuming that super fund is open to applications from the general public, and it doesn’t have to be an industry fund. The industry funds sector has a special website that you can visit to find out more information about the different super funds. This link takes you directly to a link for 16 industry funds.
You can also check out the article Comparing super funds in 8 steps to help you with your selection process.
If you don’t have the right to choose the super fund where your employer’s SG contributions are to be paid, then you can choose your own fund for any additional contributions that you may wish to make.
According to the ATO website, you may not have
- state industrial award
- preserved state agreement
- federal industrial agreement such as an Australian workplace agreement (AWA)
- pre-reform AWA, pre-reform certified agreement, collective agreement
- old IR agreement, individual transitional employment agreement (ITEA)
- workplace determination, or enterprise agreement (these are defined terms in Federal industrial relations law).
If you’re a federal or state public sector employee, then you may not have fund choice.
You can visit Fair Work online for more information.
you didn’t answer the question – is there an advantage to joining a relevant industry fund over another industry fund aside from assessing each fund’s merits?
Remember that not all industry funds spend money to be par tof the advetising campaign so look beyond their websites, too.
Hi Tania
I do comment that the main reason for the different industry super funds for different industries is historical, and that the insurance cover is often packaged for a particular industry. If you are interested in a particular industry super fund then I suggest you ask them directly what they consider sets themselves apart from other industry funds. I will revisit this issue in a later article because I think clarifying this is important for readers.
Regards
Trish
Hi Tania
I do comment that the main reason for the different industry super funds for different industries is historical, and that the insurance cover is often packaged for a particular industry. If you are interested in a particular industry super fund then I suggest you ask them directly what they consider sets themselves apart from other industry funds. I will revisit this issue in a later article because I think clarifying this is important for readers.
Regards
Trish
Great question and I feel for you here Trish because it's a tough question to answer.
Industry funds keep costs low which is great but when it comes to understand how they invest money they're a closed book. For some bizarre reason, not a single industry superannuation fund allows their members to choose 100% passive fund managers (Vanguard, State Street and Dimensional); they all want to try and beat the market…I'd love it if someone could correct me on this one day. 16 Industry Super Funds, different brands but they all seem to do the same thing. Common sense says there is only need for one but the history of how they came to be might prevent this.
On another note, I think that their advertising is a disgrace. Australian Super is happy to have members who have absolutely no idea what superannuation is and what it is doing as featured in their commercials on tv. Shame that they don't use some of their marketing budget to educate their members. I guess keeping their members in the dark means there is less chance of them getting phone calls when they under-perform the market.
Industry Super Funds are by and large designed for ignorant people. It's protecting them which I think is a good thing. But for people that are being pro-active there are better options…