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The ultimate guide to retail super funds
Retail funds are usually run by banks or investment companies. These types of funds are open to the general public.
Types
Employees
Employers
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There are two types of retail superannuation funds. Retail funds are known as “for-profit” funds and the master trust option is the most common type of fund. Retail funds are often owned by the big 4 banks, see below for an example:
- BT Super (Westpac)
- MLC Super (NAB)
- Colonial First State Super (Commonwealth Bank)
- OnePath Super (ANZ Bank)
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Compare retail super funds in Australia
*Past performance data is for the period ending June 2020.
What are the features of a retail fund?
- Retail super funds are open to everyone
- They have a wide range of investment portfolios available
- They may be recommended by financial planners, so it's important to check if your financial planner paid any fees or commission if you sign up.
- They are usually accumulation funds, not defined benefit funds. In other words, your super balance depends on the contributions you and your employer make to the fund. In a defined benefit fund, your pension or final super benefit is determined using a predetermined calculation, looking at factors such as your average salary or salary in the final few years before retirement, plus your age and your years of service.
- They often charge mid to high fees, but now some are offering the no-frills option, MySuper
- Companies may want to retain some of the profits, which could mean lower returns for you
What are the pros and cons of retail funds?
Pros:
- Lots of investment options.
- Reasonable results, especially over the past 12 months.
- Some good advice provided by a large section of advisers.
Cons:
- More so leading down the line of tied advice.
- Self-managing can be less expensive for amounts over $200,000.
- Dependent on the skill and experience of the adviser.
Outcome: Retail funds can be beneficial to clients looking for advice and funds management.
Back to topHow do I compare retail super funds?
Here the features to compare:
- Historical performance. Look at long term returns that span about five to 10 years. It's better to look at the long term yields as super is a long term investment.
- Aim for low fees. If you have lower fees, the less your balance will reduce every year. However, you may find that funds with large fees are the highest performing funds.
- Investment options. You will get more value out of your fund if you get a matched investment portfolio.
- Insurance. Insurance is generally cheaper if you get it within insurance, but it's best to check if it adequately covers your needs.
- Customer service. Do you prefer checking your fund online or would you prefer using the phone to speak to a real person? These are factors to take into consideration.
How do I apply for a retail fund?
First things first. Make sure you know why you want to change to a retail fund or open a retail fund. There are many reasons why you may want to change funds:
- Is it to consolidate your super all into one account?
- Is to reduce the amount of fees being charged?
- Do you want a better funds with more features?
- Do you want a better long term return?
- Do you want to leave a corporate fund because you've resigned from your job?
Once you go through these checks, you can then apply online to either open or switch to a retail super fund.
Compare different types of super funds
While a retail super fund might have some beneficial features, you may want to consider all the different super fund options before committing to one. Compare the different types of super funds available in Australia below to determine whether a retail super fund is the best option for your superannuation needs.
| 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. |
Retail super funds developed by financial institutions and insurance companies. These funds cater for people who are interested in investing and saving for retirement.
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