Industry fund vs Retail Super fund
This has been one of the biggest topics of debate in recent years with the rise of industry funds as well as Australians starting to take a more active approach with their superannuation and retirement benefits.
Retail super funds have always received criticism about issues such as high fees, complicated structures and also the fact that commissions can be paid to financial advisers.
Initially Retail super funds did start of more expensive as they were developed by financial institutions and insurance companies to generate profit, although this has changed a lot in the last few years with the improvement of technology, lower platform costs and lower overheads.
If looking in the right place you can now find Retail super funds out there which are very comparable to your current Industry funds which offer greater investment choice, superior insurance options as well as the ability to have a financial adviser attached to the portfolio.
Industry super funds which were initially developed by trade unions and industry bodies to offer a low cost fund for their members now allow access to the general public and usually give you access to a small number of investment options as well as a simple platform when compared to many of the retail funds.
When looking at historical investment returns, Investors should not take this as an indicator of future returns as the likelihood of a fund performing year after year is highly doubtful. You should always look at the underlying investment of a fund, the current market conditions as well as how you feel about investing (Are you willing to take more risk for a higher return?)
The reason a Financial Adviser can help in all of this is by being able to compare several funds and depending on your circumstances and investment approach, will be able to tailor a product and investment strategy around your goals and objectives. Financial Advisers may help you to structure your insurances correctly with the help of superannuation contributions, save you tax, choose the right contribution amounts and in the end try to get you to a better place in retirement.
Fees for Financial advice are generally charged on top of platform fees and planner fees can be charged to retail super funds whereas Industry funds may not permit this resulting in fees having to be charged directly to you.
Another thing to consider is Insurance, as 83% of superannuation members choose the default insurance cover which has its own pro’s and con’s. Default insurance inside super is generally cheaper and usually at an amount of a between $100,000-300,000 which in reality may not be enough given the average home loan is above $500,000 at the moment. If you also have pre-existing medical issues, most default insurance providers won’t cover this so it is best to be medically underwritten if you want peace of mind.
In conclusion both type of Superannuation funds have their pro’s and con’s and if you are unsure about which one is best for you then it is best to speak with a professional about your options as this will eventually be your nest egg in retirement with significant tax benefits, potential inheritance for your beneficiaries and also possibly one of your biggest assets beside your family home.
For more details, contact your super fund or speak to your financial adviser.