Industry vs retail super funds: 4 differences to consider in 2023
Not sure whether an industry or retail fund is right for your superannuation needs? We take a look at some of the key features.
In Australia, there are 2 main types of super fund – industry funds and retail funds.
Although they can both offer benefits, they're quite distinct from each other in the way they operate.
So when you're thinking about selecting a super fund – or switching to a new one – it's important to be aware of whether it's an industry or retail fund.
The choice you make may have significant implications for the funds you'll have available in retirement.
With this in mind, let's take a look at some of the main differences between industry and retail funds.
1. For-profit and not-for-profit
Broadly, retail funds can be considered "for-profit", while industry funds are "not-for-profit".
Retail funds are usually owned by a larger financial body. Banks and insurers are the most common in Australia, though a handful of other types exist.
Accordingly, they're run to benefit additional parties aside from members – like shareholders and investors.
By contrast, industry funds are run as not-for-profit organisations, with their profits returned to members.
CareSuper is an industry fund that is open to everyone – there aren't any special requirements to become a member.
CareSuper is also part of the Industry SuperFunds collective. You can spot a member fund by the distinctive Industry Super Funds logo.
2. Returns and overall performance
Returns are really important to consider when you're weighing up super funds.
After all, the returns you receive are going to determine the resources you have available during your retirement.
So before you pick a new fund – or decide to stick with your current one – you should look at their returns and performance.
However, you can't just look at the last couple of years. Markets fluctuate, and accordingly so do returns on a year-to-year basis.
Rather, you should be looking back at least 5 years (preferably 10 or more, where possible) to get a feel for how the fund has performed for its members during this time.
As a general rule, industry funds have tended to perform better than retail funds over the long term.
In fact, data from Industry SuperFunds indicates that industry funds have outperformed retail funds over the last 5, 10 and 20 years.
So while past performance doesn't dictate future performance, it can provide insights into the fund's attitudes to fiscal responsibility.
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3. Investment styles
Both retail and super funds invest with the aim of profitability. The primary difference is that industry funds tend to invest more heavily in unlisted assets like infrastructure.
Within this structure, some funds also enable members to select their own investments.
This offers a variety of benefits. You also don't need to be an expert to choose investments that align with your retirement goals, values and risk tolerance.
Let's look at CareSuper as an example of a fund that offers members this choice. CareSuper's investment options encompass a range of pre-mixed portfolios and single asset class options.
With 13 different investment options spread across growth and defensive assets plus a direct investment option, you're able to mix and match to build a portfolio that's right for you.
4. Fees and services
Whether you opt for a retail or industry fund, you'll need to pay fees.
Accordingly, you need to weigh up the benefits your fund offers, versus the fees you're paying.
However, it is worth noting that industry super funds generally tend to charge lower fees than retail funds, as they're run on a not-for-profit basis.
So what sort of services should you look for?
Insurance and financial advice are 2 of the most common services across retail and super funds.
Most super funds will provide life insurance, TPD insurance and income protection insurance.
Via its partners, CareSuper offers discounted forms of these types of insurance, as well as health insurance too.
You don't necessarily have to use your super fund's insurance options – but they can be handy for getting coverage at a better rate than from outside providers.
It's also important to look for a super fund that offers financial advice and education from qualified professionals.
After all, your super needs may change throughout your lifetime. It's important to be able to seek external advice about rearranging your investments or switching products.
CareSuper is one fund that provides access to financial professionals*. With the right support, you'll be able to make more informed decisions about your super and your future.