What’s The Difference Between Industry And Retail Super Funds?

Superannuation is a critical part of retirement planning in Australia. One of the key decisions individuals face regarding superannuation is selecting the right super fund. The two main categories of super funds are industry super funds and retail super funds.

Both types offer different benefits and features, and understanding their differences can help you choose the one that best suits your financial goals and retirement needs.

In this article, we will compare industry and retail super funds, exploring their structure, fees, performance, and other essential factors to consider.

Navigate to these guys and let us help you make an informed decision.

What Are Industry Super Funds?

Industry super funds are superannuation funds typically run by unions or industry groups. They are designed to serve the interests of employees in a specific industry or sector. These funds are generally not-for-profit, meaning any profits generated are reinvested back into the fund rather than distributed to shareholders.

Key Features Of Industry Super Funds

1. Not-for-profit structure: Industry funds do not distribute profits to shareholders. This structure allows them to reinvest profits into improving the services and returns for members.
2. Low fees: Industry super funds are generally known for having lower fees than retail. This can result in better long-term returns for members.
3. Member-focused: Industry super funds are typically run for the benefit of their members, which means decisions are made to deliver the best outcomes for their clients, not for profit.
4. Wide range of investment options: Industry super funds often offer a range of investment choices, including options for conservative, balanced, or growth portfolios. They also tend to offer some level of ethical investment choices.
5. Lower profit margins: As these funds are not-for-profit, they usually have lower administrative costs. This means more superannuation contributions can be directed towards your retirement savings.

Who Can Join Industry Super Funds?

Industry super funds are usually open to people who work in specific industries, such as healthcare, education, or construction. However, many industry funds have expanded their offerings and now allow anyone to join, even if they don’t work in the particular industry the fund was initially established to serve.

What Are Retail Super Funds?

Retail super funds are superannuation funds run by financial institutions, such as banks or investment companies, to generate profits for shareholders. These funds tend to be for-profit, and their primary objective is to provide returns for investors, not just fund members.

Key Features Of Retail Super Funds

1. For-profit structure: Retail super funds are run by financial institutions to make a profit. As a result, the profits generated are often distributed to shareholders rather than reinvested into the fund.
2. Higher fees: Retail super funds tend to have higher fees than industry super funds. These fees include administrative, investment management, and adviser fees, which can affect your overall returns.
3. Wide range of investment options: Retail super funds also offer a range of investment choices, but they may provide a broader selection of investment products and options, such as direct shares, term deposits, and managed funds.
4. Access to financial advice: Many retail super funds offer access to financial advisers who can provide personal advice to help guide your investment strategy and retirement planning.
5. Profit-driven: Retail super funds focus on generating returns for shareholders, which can lead to higher fees and less member-centric management compared to industry funds.

Who Can Join Retail Super Funds?

Retail super funds are generally open to everyone. Anyone can join a retail fund, regardless of their employment sector or industry. These funds are often marketed to a broad audience, making them accessible to many Australians.

Comparing Industry And Retail Super Funds

When deciding between an industry super fund and a retail super fund, several factors must be considered, including fees, investment options, performance, and customer service. Let’s break down the key differences between these two types of super funds.

1. Fees

• Industry Super Funds: Industry super funds are generally known for having lower fees than retail funds. These lower fees are due to their not-for-profit structure, which focuses on providing value to members rather than generating profits for shareholders.
  
  • Example: An industry super fund may charge a lower administration fee and fewer investment management fees, which can result in more of your superannuation being invested for retirement.
    
• Retail Super Funds: Retail super funds often charge higher fees because they are profit-driven. These fees include management, performance, and financial advice fees.
  
  • Example: A retail fund may charge higher management fees or additional fees for accessing financial advice.

2. Performance

• Industry Super Funds: Industry super funds tend to perform well over the long term due to their low fees and member-focused approach. While past performance does not guarantee future returns, many industry funds have consistently delivered strong results for their members.
• Retail Super Funds: Retail super funds may offer competitive returns, but the higher fees can eat into your investment gains. Retail funds also may not perform as consistently as industry funds because their management is profit-driven, which can sometimes lead to a focus on short-term gains.

3. Investment Options

• Industry Super Funds: Industry super funds typically offer various investment options, such as growth, balanced, and conservative portfolios. They may also provide ethical investment options for socially responsible investors.
  
  • Example: You can choose an investment strategy that aligns with your risk tolerance and long-term financial goals.
    
• Retail Super Funds: Retail super funds offer a broader selection of investment options, including managed funds, term deposits, and direct shares. While this can provide more flexibility, it may also come with more complex choices that require more active involvement from the member.
  
  • Example: A retail fund may offer access to specific market sectors or niche investment strategies not typically found in industry funds.

4. Customer Service And Support

• Industry Super Funds: Industry super funds provide a more member-focused experience. With fewer members, customer service can often feel more personalised, and you can expect a more tailored approach to managing your super.
  
  • Example: An industry super fund might offer tools and support specifically designed for members in a particular industry.
    
• Retail Super Funds: Retail super funds may have larger customer bases and more complex structures, sometimes making it more challenging to get personalised support. However, they may offer access to financial advisers who can assist you with making decisions about your superannuation.

5. Access To Financial Advice

• Industry Super Funds: While some industry funds provide access to basic advice, others may not offer comprehensive financial advisory services. Industry funds tend to focus more on providing low-cost, member-centric options rather than offering financial planning services.
• Retail Super Funds: Retail funds often provide access to various financial advisory services. Members can receive personalised advice tailored to their retirement goals, which can be an added benefit if you need more guidance in managing your super.

Conclusion

Choosing between an industry super fund and a retail super fund depends on your individual retirement goals, preferences for fees, investment options, and the level of financial advice you need. Industry super funds generally offer lower fees and are more member-focused, making them a good choice for long-term growth. 

On the other hand, retail super funds provide a wider range of investment options and access to personalised financial advice, but often at a higher cost. Understanding the key differences in structure, fees, and services will help you make the best decision for your superannuation.

Frequently Asked Questions

What Is The Main Difference Between Industry Super Funds And Retail Super Funds?

The primary difference lies in their structure. Industry super funds are not-for-profit and run for members’ benefit, offering lower fees and focusing on long-term performance. In contrast, retail super funds are for-profit and managed by financial institutions, often charging higher fees but providing a wider range of investment options and access to financial advice.

Are Industry Super Funds Better For Retirement Savings?

Industry super funds are often considered better for long-term retirement savings due to their lower fees and member-centric approach. The lower fees mean more of your money is invested, potentially resulting in higher returns. However, it’s essential to consider your financial goals and the investment options available in both funds.

Can I Transfer My Superannuation From A Retail Fund To An Industry Super Fund?

You can transfer your superannuation from a retail to an industry super fund. The process is relatively simple, and most industry funds offer tools to help you transfer your balance. However, checking for exit fees or insurance implications before switching is essential.