Industry super funds
Industry super funds often have low fees and high long-term investment returns, so switching to one could mean you retire with tens of thousands more in your super.
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Industry super funds are not-for-profit super funds that are owned by the members of the fund. These funds give profits back to members in the form of lower fees, instead of paying profits to shareholders like many retail super funds do. Lower fees often mean higher investment returns over the long term, too.
Industry super funds tend to cater for a specific working industry or sector which is often how they started, however, anyone is welcome to join these funds now. You can compare the fees, features and past performance of each of these in our comparison table below.
Industry super fund offer: AustralianSuper
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- Australia's largest industry super fund
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*Past performance data is for the period ending June 2020.
What is an industry super fund?
An industry super fund is a type of super fund that operates to benefit members. These members usually work in a particular industry or sector. Many industry super funds were initially only available to workers in a certain industry, for example, hospitality or retail. However, today, most industry super funds are open for all Australians to join. Industry super funds aren't owned by a major bank or financial institution. Instead, they're owned by the members of the fund. Industry super funds are not-for-profit funds, as they don't exist to make a profit for a parent company or shareholders, but instead exist to benefit the members of the fund.
Industry super funds typically have the following features:
- A lot of members from a particular industry
- Low fees compared to some major retail funds
- Strong long-term performance figures
- They're not owned by a bank or financial institution
- Large investments in Australian infrastructure (unlisted assets)
- Will sometimes have the Industry Super Australia symbol on their branding and marketing materials
What is Industry Super Australia?
Industry Super Australia is an advocacy body representing the needs and interests of industry super funds. It's also a research body which commissions consumer research projects on the superannuation sector at large, with a focus on industry funds and their benefits to Australians. Industry Super Australia actively campaigns for Australian workers to join an indutry super fund as opposed to a retail fund, often citing data that industry funds on average perform better than retire funds.
There are 15 super funds which are members of Industry Super Australia (listed below). However, not all industry super funds are members of Industry Super Australia.
Industry super Australia fund members 2020
These 15 funds are all members of the peak advocacy body Industry Super Australia.
|Industry super fund||Industry|
|AustralianSuper||No specific industry|
|Cbus||Construction and building|
|HESTA||Healthcare and community services|
|Hostplus||Hospitality and retail|
|MTAA Super||Motoring and small business|
|NGS super||Non-government education and community organisations|
|LUCRF super||No specific industry|
|Media Super||Print, media, entertainment and arts|
|Energy Super||Energy, renewables and electrical|
|First Super||Furniture, joinery, paper and timber|
|REI Super||Real estate|
Industry super funds versus retail super funds: what's the difference?
A lot of the biggest super funds in Australia are either industry super funds or retail super funds. Industry super funds and retail super funds have many similarities. Both offer solutions for Australian workers to save money for retirement. Both industry and retail funds offer members a range of investment options, including default MySuper or balanced options as well as high growth and conservative options. Both types of super funds offer members insurance cover within their super.
However, there are a few differences between retail and industry funds to be aware of. The main differences between these two types of funds lie in their ownership structure, which ultimately affects their fees and investment returns.
Industry super funds are member-owned, not-for-profit funds. They're not owned by a bank or financial institution like retail funds. They also don't have shareholders to pay (or please!) as they're not publicly listed companies. Profits go back into the industry super fund to benefit the members.
Retail funds are owned and operated by large financial institutions like banks or insurance providers, so they're not owned by members. Because retail funds are often owned by publicly listed companies on a stock exchange, the super fund pays some of its profits to shareholders (in the form of dividends), investors and also executives and board members employed by the financial institution.
Because retail super funds aim to make a profit, they often charge higher fees than industry funds. However, this isn't always the case, so make sure you compare your options before committing to one fund over another.
Attracting new members
Industry super funds don't pay commissions to financial planners to sell or recommend the fund to consumers. This means that, in theory, the money the industry fund generates goes back into the fund to benefit new and existing members.
Industry super funds do, however, spend a significant amount of money on advertising to attract new members. This has been described by critics as not fitting in with the "profit-for-members" philosophy. However, the funds argue that the more members it has, the more it has in funds under management, which will ultimately benefit all members in the long term.
Retail funds, on the other hand, are known to pay commissions to financial planners to sell their super product to clients. The money used to pay these financial planners comes out of the super funds' profits (generated by the fees charged to members).
Because retail funds are owned by large financial institutions that offer many different financial products and services, it's also common for a bank's financial adviser to cross-promote the super fund product to bank customers who have another product, like a mortgage. This isn't necessarily a bad thing; if you've got all your banking products with a particular bank then having your super with the same bank might be a convenient and appealing option for you.
Another interesting point of difference between these two types of funds is that industry super funds have significant investments in unlisted assets. This mainly includes Australian infrastructure like roads, bridges, airports and public transport.
Some analysts say these investments have helped industry super funds outperform retail super funds on average over the long term. However, others have raised concerns about the large amount of workers' super being invested in unlisted assets that are difficult to value and difficult to sell in comparison to listed assets like shares.
How well do industry super funds perform?
Industry super funds have, on average, performed better than retail super funds over the long term, according to research and advocacy group Industry Super Australia. One potential reason for this is that industry super funds tend to charge lower fees (although this isn't always the case). Because fees eat into your investment returns, the higher the fees, the less you'll earn in returns.Here are the best-performing industry super funds according to super research agency Chant West.
Best-performing industry super funds
|Industry super fund||10-year return p.a. to June 2020|
This list looks at the growth funds only (funds with 61-80% allocation to growth assets), which is where the majority of members have their super. Some industry funds have high growth and index investment options that may have performed even higher.
Industry super fund fees
The fees charged by industry super funds vary, and will depend on the investment option that you're in. Looking at the default investment options (these are usually the MySuper, balanced or growth options), AustralianSuper Balanced has the lowest annual fees at $411.18 p.a. on a $50,000 balanced. In comparison, First Super has the highest annual fees at $852.79 p.a. on a $50,000 balance.
You can compare the annual fees charged by each industry fund for their default investment option in the comparison table above.
Some industry super funds offer an index investment option, which will charge much lower fees than a standard balanced or growth investment option. This is because it's a more passive form of investment that requires less work from the investment managers (instead of cherry-picking stocks, an index fund simply tracks an index like the ASX200).
For example, Hostplus's Indexed Balanced investment option (which shot to fame after the Barefoot Investor declared that it's his chosen super fund) charges just $103 p.a. on a $50,000 balance. This option invests your super in a mix of index funds (also known as exchange traded funds) rather than individual shares and other assets like infrastructure.
How to pick the right industry super fund for you
There's no single industry super fund that is best. What's right for you might not be right for someone else. The right industry super fund for you depends on a number of factors:
The industry you're in: Industry funds are now open to all Australians to join, however many still cater for workers in a particular industry. For example if you're in the construction industry, it's likely that your employer will recommend Cbus. Cbus invests in construction projects around the country, helping to support the sector and keep workers in jobs.
If you want a particular investment option: If you're after a particular investment option, such as an indexed option or an ethical option, these aren't offered by all industry super funds. HESTA for example offers an ethical investment option (Eco Pool) but no indexed investment option. While LUCRF Super offers an indexed investment option but no ethical option.
If you want a lifestage investment strategy: Are you looking for a lifestage super option, which adjusts your super investments in line with your age? This type of option is only available with Maritime Super. The other industry super funds all offer pre-mixed balanced or growth funds as their default option. There are, however, quite a few retail super funds that offer a lifestage investment approach.
How to switch to an industry super fund
Despite initially being established for a particular sector, industry super funds are now open for all Australians to join. Switching to an industry super fund is a quick and easy process that can be done online in less than 30 minutes.
Follow these steps to switch to an industry super fund:
1. Pick an industry super fund.
You can use the comparison table above to compare the fees and performance figures for all industry super funds. If you click on the name of the fund, you'll also be taken to our dedicated review page for the fund to learn more about its features and how it invests your super.
2. Join the fund.
Complete the online membership application form for the fund you've chosen. Make sure to have details like your Tax File Number and your employer's details handy, as well as ID like a driver's license or passport.
3. Close your previous fund (if you have one).
If you've got a super fund already and you want to move your super over into the new industry super fund, you can declare this in the application form in step 2. There will be an option to consolidate your super in the application form. Just provide your membership number/s from your old fund, and the new fund you're switching to will take care of the rest.
4. Tell your employer.
Once your new super fund is up and running, you'll get your new membership details sent to you. Give these to your employer so that they can pay your super guarantee payments directly into the new fund.
Have you decided an industry super fund isn't what you're after? Maybe one of our best super funds picks will be right for you instead.
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