Everything you need to know to guide you through the complex world of corporate super.
A corporate fund is usually arranged by your employer under a board of trustees. The employer and employees get to choose the board. Large retail or industry super funds can also operate their own corporate funds.
What are the features of a corporate super fund?
Here is a list of the common features of a corporate super fund:
- All the profits are returned to the members if the fund is run by an industry super fund, or employer. Retail super funds may retain some of the profits.
- A range of investment options are available to suit different investors.
- The fees are generally low to mid, though small employers could charge higher fees.
- Most corporate funds are accumulation funds.
What are the pros and cons of corporate super?
- You get choice and flexibility. The range of investment funds covers all major asset classes. With corporate super, you get access to a wide of range of asset and asset combinations.
- You can choose between different membership types. This means you can choose between a defined benefit fund (assuming this is available) or accumulation funds, or a combination of both.
- There is rollover assistance. Transfer your other super funds to corporate super with hassle-free assistance.
- Value. The value of investments always rise and fall.
- Returns. Your returns, like any investment, is not guaranteed.
- Overseas risk. If your fund invests overseas, there is risk involving currency conversion.
How does corporate super work?
Within corporate super, you generally have the flexibility to choose and then vary your investment strategy to suit your circumstances. When choosing the investment fund in which to invest or switch, (some or all of your super) you should consider the level of risk, likely investment return and your investment timeframe.
Until you make an investment choice, when you join corporate super, you’ll be invested in the default investment strategy.
The top performers
There has been a lot of variety in the returns for super in the past few years. See how the investment returns for top performing super funds over 1, 5 and 10 year periods.
The following table shows net investment returns for periods to 30 June 2016.
|Investment option||Growth assets (%)||1 year (% p.a)||5 year (% p.a)||10 year (% p.a)|
|Cbus Growth (Cbus MySuper)||71.3||5.5||9.3||6.2|
|BUSS (Q) Balanced Growth||72.5||7.0||9.2||6.4|
|Catholic Super Mod. Aggressive||80.0||5.9||9.1||6.6|
|REI Super Balanced (MySuper)||76.0||5.4||8.9||5.3|
Source: Chant West
Of course, it’s worth pointing out that past performance is no indicator of future performance.
Risks of corporate funds
You've heard the term, high risk high return. This concept also applies to super funds. All super funds carry an element of risk and the assets held by your super fund defines the risk level.
When considering the risk associated with your super investment it’s important to keep the following in mind:
- The value of investments can rise and fall.
- The returns you receive from your investment will vary and future returns may be different to past returns.
- Super fund returns are generally not guaranteed which can results in losses.
- The total balance in your super fund (including contributions and returns) could be insufficient to meet your financial and personal needs.
- Your investment may be affected by changes in the economic and political climate or changes to legislation, particularly in relation to taxation and super laws.
How do I compare corporate super funds?
There are many ways to compare super funds but one of the best ways to compare funds is to look at performance. It’s best to look at performance over a range of years. Looking at just the previous year’s performance will not give you a long-term outlook which is what you need for super (a long-term investment).
Here are some things to check when comparing super funds:
- Performance. A good indicator is long-term performance. Compare the returns over a period of 5-10 years.
- Fees. Higher fees may be worth it if the funds has a history of high performance.
- Investment options. Opt for an investment option that is suited to your risk profile.
Also look at the Product Disclosure Statements (PDS) to understand the inner workings of the super funds that you want to compare. In the PDS, you want to look for the significant benefits, the different levels of risk, the fees and charges plus any of the products your super provider may receive.
Frequently asked questions
Is my super part of a corporate super plan?
If you super account was arranged for you by your employer as part of your employee benefits, then you are most likely part of a corporate super plan. A corporate super fund is where your employer has engaged a superannuation fund and negotiated terms which can include discounted fees, automatic insurance cover, and other employee benefits.
What are the benefits of being a part of corporate super plan?
If you work for a large company, the ongoing costs of your superannuation account can be lower, as your employer may have been able to negotiate better terms with your super fund due to the amount of funds invested. Conversely, if you work for a small company, you may find that your fees are comparatively higher.
Additionally, you may have what is known as Automatic Acceptance Limits, meaning that any insurance cover up to a certain level is issued automatically and does not require any medical underwriting.
What if I was part of a corporate super plan, though no longer work for the same employer?
If you have since left your employer, though have retained your previous corporate super account, you may have automatically transitioned into the personal division, or retained member division. While you are able to keep this account, the benefits such as lower fees and automatic insurance cover are sometimes lost. This can mean that you are now paying higher fees for fewer benefits.