Note: Every few months, we update this article with the latest data on superannuation funds issued by the Australian Prudential Regulation Authority (APRA). This article contains the latest data available as of March 2011 (for data as at September 2010).
Unless you work in the superannuation industry, how the world of super works can be bamboozling (sometimes it can be confusing even when you know the industry well). This article, on the different types of super funds, helps explains the main players in the Australian super world.
This article should really be titled ‘The what’s what in the super zoo’ because I’m explaining the different types of super funds available, rather than the people involved.
You may find this difficult to believe but there are only five types of super funds in Australia, and most Australians can only choose from three of these fund types. You can expect to find the following five broad types of super funds:
- Company (or corporate) funds
- Industry funds
- Retail funds (although you may be offered a series of funds via a ‘wrap’)
- Public sector funds
- Small funds (two-types: self-managed super funds or small APRA funds. APRA stands for the Australian Prudential Regulation Authority, the main super regulator)
Let’s deal with the big numbers first. Based on statistics released in December 2010, there were 438,514 super funds in Australia as at 30 September 2010, and 438,092 of these super funds were small funds (super funds with fewer than 5 members). Nearly all small funds are self-managed super funds (SMSFs) (434,239, commonly known as DIY super funds, and 3,853 of small funds are small APRA funds.
What this means is that if you considering one of the remaining four categories of super fund – corporate, industry, retail, public sector – then you have only 422 super funds to consider. Okay, that is still a lot of super funds, but if we break it down into the individual categories (see table below), the super world looks a little less daunting.
|
Type and Number of Super Funds
|
|
Type of Fund
|
Number of Super Funds
|
| |
June 2009 |
March 2010 |
June 2010 |
Sept 2010 |
| Corporate (or company) |
190 |
171 |
168 |
162 |
| Industry |
67 |
65 |
65 |
65 |
| Retail |
166 |
154 |
154 |
156 |
| Public Sector |
40 |
39 |
39 |
39 |
| Subtotal |
463 |
429 |
426 |
422 |
| SMSFs (DIY super funds) |
404,146 |
422,687 |
428,198 |
434,239 |
| Small APRA funds |
4,277 |
3,879 |
3,860 |
3,853 |
| Total* |
408,886 |
420,452 |
427,179 |
438,092 |
*
This grand total excludes pooled superannuation trusts and single-member ADFs
Source: Extracted from Statistics, Quarterly Superannuation Performance, September 2010 (issued 9 December 2010), Australian Prudential Regulation Authority.
Briefly, the following are the four types of managed superannuation fund:
- Industry fund. An industry fund usually caters for workers from a particular industry but many of them are now available to anyone.
- Company/corporate fund. A company or corporate fund is generally a super fund with membership only open to employees working for that company. You can’t choose a company fund but you may choose to remain in a company fund, if you’re an employee of the company and an existing fund member. Some company funds permit relatives of existing members to join too.
- Public sector fund. A public sector fund is only available to public sector employees and, in some cases, ex-public sector employees. You can’t choose a public sector fund although some of them let you choose to remain a contributing member when you leave the public sector – in these circumstances you may be able to arrange for your new employer to contribute to your public sector fund.
- Retail fund or master trust. Financial institutions such as banks, financial planning groups and fund managers run retail super funds. Anyone can join these types of funds. You may be a member of a retail fund if your employer pays your SG contributions into a corporate master trust. A corporate master trust is just like a master trust for individuals but on a much larger scale.
If you visit a financial adviser you may also hear the terms ‘super wrap’ and ‘master trust’. These two categories generally offer you access to lots of managed fund investments, and fall under the category of ‘retail funds’.
You can also consider opening a Retirement Savings Account (RSA). An RSA is a low-risk and low-return superannuation account provided by banks and other financial organisations. RSAs, however, are more a parking vehicle rather than a long-term investment option. RSAs represent less than two-tenths of 1 per cent of all money invested in the superannuation market.
Note: Unless you’re already a member of a company fund (although some company super funds permit relatives of employees to become members) or a public sector fund, an employee can generally only choose from three types of super funds:
- Industry funds
- Retail funds
- DIY super funds.
I explain the different types of superannuation funds, and how to choose a super fund, in my book Superannuation For Dummies 2nd edition (Wiley).
Related links:
This article first appeared on
www.SuperGuide.com.au, a free and independent website on superannuation for consumers. This article is written by Trish Power, co-founder of consumer information website,
www.SuperGuide.com.au, and author of
Superannuation For Dummies (Wiley) and
DIY Super For Dummies (Wiley)