Industry Super vs Retail Super – Compare The Pair
Many of us have seen the ads on TV comparing Super Funds spruiking the benefits of specific Super Funds. When they say “compare the pair” what do they actually mean?
In this article, we will explore Industry Super Vs Retail Super funds. Giving you real-world examples of each as well as some potential benefits of each type of Super Fund.
What Is An Industry Super Fund?
An industry super fund is a fund that has been traditionally created to serve members within a particular industry.
For instance, Industry Super Funds like HESTA were established to cater to health and community workers, whereas UniSuper was founded to support individuals employed in academia and tertiary education.
Initially, these funds were exclusively accessible to individuals employed in specific sectors like healthcare, education, and construction. However, as time passed, many of these funds expanded their membership to the wider public.
Furthermore, numerous funds have merged over the years to create larger entities known as megafunds. For instance, QSuper and Sunsuper merged in February 2022 to establish Australian Retirement Trust [1].
Which Superannuation Funds Are Industry Super Funds?
Most people will be familiar with industry super funds which are household names. Many of these funds have grown and expanded over time as their membership numbers have grown, and in many cases merged or acquired other superannuation funds.
These Industry funds include:
- Australian Super
- Australian Retirement Trust
- HESTA
- Aware Super
- UniSuper
- Retail Employees Superannuation Trust (REST)
- Construction and Building Unions Superannuation Fund (Cbus)
Why Choose An Industry Super Fund
People will often opt for an Industry super fund for the following reasons:
Member Focused: Industry superannuation funds, often known as profit-for-member funds, prioritise the financial well-being of their members as their main objective.
This means that all generated funds are reinvested back into the fund, ultimately leading to benefits for its members. Importantly, they aren’t required to allocate profits to shareholders.
Lower Fees: Industry super funds are recognised for their relatively low fees when compared to retail super funds.
This is because they operate on a not-for-profit basis, with any profits being reinvested for the benefit of members rather than being distributed to shareholders.
Strong Investment Performance: Many industry super funds have a history of delivering solid investment performance over the long term.
However, it’s important to note that past performance is not a guarantee of future performance.
Additional Benefits: Certain industry super funds offer extra benefits beyond retirement savings.
These perks can include insurance options (such as life, disability, and income protection coverage) and educational resources to help members make well-informed financial decisions.
Depending on the fund, more specific and tailored financial advise can be sourced through the Super fund itself.
Governance: Industry super funds are governed by trustee boards that include both employer and employee organization representatives. This ensures that decisions are made with the best interests of the members in mind.
Not-for-Profit Approach: Industry super funds are run solely to profit their members. They do not pay profits or dividends to shareholders, ensuring that the focus remains on member benefits.
What Is A Retail Super Fund?
Retail super funds are commonly managed by sizable for-profit enterprises like banks, insurance firms, and investment companies. Within this profit-oriented framework, the primary goal is to generate profits, a portion of which is shared with shareholders.
In contrast to industry super funds, which were originally tailored to cater to individuals employed in specific sectors, Retail Super Funds are accessible to the broader population.
These funds are operated by profit-seeking entities and are frequently overseen by the financial institution that provides them.
Which Superannuation Funds are Retail Super Funds?
Retail super funds might not be as recognizable to individuals as their industry fund counterparts. Some established Retail Super Funds include:
- Colonial First State superannuation (Owned by KKR and Commonwealth Bank)
- MLC superannuation (Owned by IOOF Holdings)
- OnePath superannuation (Owned by IOOF Holdings)
- AMP superannuation (Owned by Resolution Life Group Holdings Ltd)
Why Choose A Retail Super Fund?
Inclusivity: One of the primary advantages of retail super funds is that they are open to everyone. Regardless of your employment status or industry, you can access a retail super fund.
This inclusivity ensures that individuals from different working backgrounds can save for their retirement through these funds.
Diverse Investment Portfolios: Retail super funds provide a wide array of investment portfolios. This diversity enables you to tailor your investment strategy according to your risk tolerance, financial goals, and personal preferences.
With options ranging from shares and bonds to property and other assets, you have the flexibility to create a well-rounded investment mix.
Competitive Returns: Retail super funds often strive to deliver competitive returns on your investments. Under their for-profit mindset they are wanting to maximise yours and their financial returns.
Enhanced Investment Control: Retail super funds may offer customers a higher degree of control over their investments. You may have the option to choose specific assets or investment strategies, allowing you to align your super fund with your unique financial aspirations.
As a result of the operational foundation and ownership of the Super Fund, they possess the capacity to offer a holistic financial solution.
For example, AMP provides supplementary financial guidance and banking options that might not be accessible through an industry super fund.
Insurance Coverage: Many Retail super funds go beyond just investment opportunities. They can provide members with a competitive range of insurance options related to their superannuation funds.
These can include life insurance, total and permanent disability (TPD) insurance, and income protection insurance.
Summary
When deciding on a super fund, whether that be Retail Super vs Industry Super Fund it is important to consider a range of factors. I cover this topic in greater detail in my How To Choose A Super Fund? However, here is a brief explanation:
Investment Performance: It is important to assess a Super Funds performance over the long term and evaluate its historical ability to generate substantial returns.
However, it’s important to note that past performance is not a reliable indicator of future performance.
Fees: It is important to consider the fees charged by the individual super fund. These can vary wildly, whether that be Retail Super or Industry Super funds.
For a more comprehensive and detailed insight, take a look at my Australian Super Review and Vanguard Super vs Hostplus comparison. These reviews highlight the significant impact that varying fees can have.
Investment Options: The array of investment options offered by a fund should be tailored to align with your individual circumstances and your risk appetite level in terms of exposure. Selecting a fund that accommodates your unique financial situation is key.
Insurance: For those considering life insurance coverage through their super, it’s advisable to delve into the insurance offerings of the fund. Scrutinize the extent and nature of coverage provided, while also checking the associated premiums.
This information is often contained within the funds product disclosure statement (PDS)
Finally, whether you’re looking at Industry Super or Retail Super funds, it’s important to thoroughly review investment performance, fees, investment options, and insurance choices.
Considering all these aspects together will help you make a better decision when choosing a super fund that matches your financial goals and how much risk you’re comfortable with.
