Everything you need to know about corporate super funds.
A corporate fund is generally 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.
Risks associated with corporate 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.
What should I consider when comparing 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.
Is a corporate super fund not right for you? Compare some other options below
|Super fund type||Description|
|MySuper||Under Australian law, most employers are required to offer a MySuper-type fund as a default option for people who cannot (or don’t wish to) select their own fund. These are generally found as defaults, but you may also nominate a MySuper fund. It’s designed to be a safe option for most Australians, and is characterised by:|
|Retail funds||Widely-available commercial products, operated by financial institutions to turn a profit for themselves and their customers. These will typically be nominated, rather than selected as a default.|
Retail funds can vary widely, but are often characterised by:
|Industry funds||These superannuation funds are generally designed for workers in a specific industry, and may be especially beneficial. Some industry funds are restricted to workers in a specific industry, while others are open to everyone.|
Industry super funds will often be available as a default, or might be nominated. Sometimes a super fund will be both an industry fund, as well as a MySuper fund. The key difference between these funds and retail funds is that they are owned by members not shareholders.
They can vary widely, but are often characterised by:
|Corporate funds||These are super funds a business offers to its employees. They might be exceptionally competitive, such as in the case of defined benefit funds. Naturally these will typically be found as default funds with various advantages and features.|
|Self-managed super fund (SMSF)||The do-it-yourself super fund. You are responsible for investing your superannuation, as well as looking after the tax and legal obligations that go along with it. These are explained in more detail in this guide.|