Compare the 5 Super Fund Options in Australia
Wednesday, July 17, 2024
In this 5 min article you’ll learn;
- Why comparing funds is important
- How the comparison reveals significant results
- The details of the comparison between fund types
- What the key differences are between funds
- What you can do with this information to improve your super results
You'll gain an understanding of the full range of options available for your super, discover new opportunities and be armed with information to make better decisions for your future.
Why a fund type comparison helps
When comparing super funds, it’s important to look beyond the confines of the fund type you are in. Yes, one retail or industry fund may be better than another, but these fund types have restrictions that other fund types don't have.
Comparing the 5 fund types reveals 100% of the super choices available to you. You’ll can't play with a full deck of cards if you are only dealing the clubs, spades and diamonds. Comparing the full range of options will include the hearts for a complete view of the super game, and that's quite exciting!
How we compare the funds
We’ve used ATO and APRA data to understand the total percentage of Australians in each fund type. We then compare that data with the total percentage of Super Wealth managed by each fund. We’ve then applied a ‘wealth ranking’ to each fund, which is measured by percentage of wealth per 1 million members.
The simple logic is, if a fund type has less wealth per million members, it has a lower ranking. If a fund has a higher percentage of wealth per million members, it has a higher ranking.
We’ll then take a look at the investment approach of each fund type to gain insights as to why they rank the way they do.
1 - Public Sector Funds
Public Sector funds are run specifically for government workers - quite often, if you do have a public sector fund, you won’t have a choice to move to any other type of fund until you leave government.
ATO/APRA Data
- Stock Market Based: Investments may vary, but are typically utilising managed funds containing stocks and bonds
- Members: 3.2 Million - 13.1% of Australians
- Assets Managed: 18.1% of the total wealth in super
- Funds operating in Public Sector Super: 27
If you're in a Public Sector fund, you should be doing quite well.
It's not typical to be able to roll your super into another fund while you are using a Public Sector Fund. Speak to your HR team to learn more about how your retirement is shaping up.
- Wealth management rank: 3rd
- Public Sector funds manage 5.9% of the total wealth in super per million members
2 - Corporate Funds
Corporate funds are set up by large Australian companies (e.g Telstra) and are used for their employees. They generally appoint a board of trustees to manage the investment of their workforce’s super.
ATO/APRA Data
- Stock Market Based: Investments may vary, but are typically utilising managed funds containing stocks and bonds
- Members: 200,000 - 0.8% of Australians
- Assets Managed: 1.2% of the total wealth in super
- Funds operating in Corporate Super: 7
If you're in a Corporate fund, you'll need to speak to your HR team to learn more about your super options.
In general, you should be outperforming people with retail and industry funds, but it's always important to check and compare from time to time to ensure you are planning your best retirement.
- Wealth management rank: 2nd
- Corporate funds manage 6.5% of the total wealth in super per million members
3 - Retail Funds
Retail funds are typically run by investment companies and banks. The fees you pay to them need to include a profit for their shareholders. Fees can be a little higher than industry funds.
Retail funds primarily invest in the stock market through managed funds using Australian and international shares and bonds.
ATO/APRA Data
- Members: 6.2 Million - 24.4% of Australians
- Assets Managed: 19.4% of the total wealth in super
- 2005 - 2021 average growth rate: 5.64%
- Funds operating in Retail Super: 64
Retail funds have generally not performed as well as Industry funds over the years (See the chart below). If you're in a retail fund, it's important to check the performance of your fund by comparing other options to avoid a poor retirement super balance (and lifestyle).
- Wealth management rank: 4th
- Retail funds manage 3.14% of the total wealth in super per million members
4 - Industry Funds
Industry funds Industry funds are run on behalf of members, to profit their members (not shareholders). Fees are generally a little lower than retail funds,
Industry funds still invest in the same way as retail funds - primarily in the stock market through managed funds..
ATO/APRA Data
- Members: 13.7M - 56.2% of Australians
- Assets Managed: 35.7% of the total wealth in super
- 2005 - 2021 average growth rate: 7.31%
- Funds operating in Industry Super: 22
If you're in an industry fund, it's also important to check the performance of your fund by comparing other options. A small change in your fund strategy can mean a big difference in your retirement lifestyle.
- Wealth management rank: 5th
- Industry funds manage 2.61% of the total wealth in super per million members
5 - Self Managed Funds
We're very excited about SMSFs - We see outstanding results! SMSFs are for people who want to manage their own super. An SMSF can borrow money for investments (like a property). You choose where to invest your money.
With the increasing professional support from dedicated SMSF Accountants, it’s now reasonably easy to set up and run an SMSF.
ATO/APRA Data
- Members: 1.1 Million Australians - 4.5%
- Assets Managed: 24.7% of the total wealth in super
- Growth rate for SMSF funds vary depending on individual strategies
- SMSF's operating: 617,631 (14,705 added in 2023)
If you have an SMSF fund, you will need the support of a good SMSF accountant to set up and run your account. You are in control of your investments, so you should be aware of your super performance.
Aside from a good accountant, you may benefit from professional support with your chosen investment strategy.
- Wealth management rank: 1st
- Self Managed Funds manage 22.46% of the total wealth in super per million members
Differences between Fund Types
All funds grow according to their investment strategy. Retail, Industry, Corporate and Public Sector funds primarily invest in stocks and bonds (all eggs in one basket), which can be risky during a stock market crash.
All fund managers essentially use the same marketplaces to select stocks and bonds for their portfolios. These selections are bundled in different ‘packaged products’ to sell to investors. The comparisons they advertise restrict you to the markets they operate in - the stock market.
SMSF’s still have access to stock market funds like Vanguard on index funds, which generally match the performance of most super funds, so you don't lose the option to invest like an industry or retail fund.
Beyond this, SMSF’s also open your choice to direct property, direct stocks (Like Microsoft, Apple, Amazon, Google, Meta and Tesla), crypto and other investment opportunities.
Investors like Warren Buffet made the majority of his wealth over the last 10 years in one stock - Apple. Other investors have made money in crypto. For many Australians, they have created significant wealth through ownership of residential property.
SMSF’s open up a range of investment choices that are not available in any other fund type. In addition, it is possible to borrow additional money in and SMSF (not available in other funds) - which means you can grow your super based on the banks money as well as your own. As long as you can profitably cover the loan costs, this can be a major boost to your retirement result.
What does this mean for you?
Your super is your money.
It’s always going to be your choice and your responsibility to invest it. Regardless of if you hand the task to a fund manager or do it yourself.
For most Australians, the idea of managing their own super investments can be overwhelming. It's easy to default to a 'set and forget' strategy with a packaged product, but by pure definition, 50% of funds are underperforming the average result.
For that reason, if you choose to stay in a managed fund, it could pay to continuously compare your fund to other funds to ensure you don’t join the below average club.
Constantly comparing funds will take time, energy. Regular meetings with financial advisors, accountants or fund brokers can help you avoid underperforming results.
Setting and forgetting your super planning puts your retirement at a far higher risk of minimum income living.
The results in the comparison show one key factor. Taking personal control and responsibility of super through an SMSF can reap significant rewards. Wouldn’t it be reasonable to investigate your full options?
If you’ve ever made money through direct shares, crypto or property, you already possess skills to get your self managed super journey underway.
Building a team of dedicated professionals to support your investment choice can complete your ability to successfully set up and run your own super fund.
Property Investment With Super
If you’ve owned property and think you'd like to investigate the facts, figures and potential of using your super to invest in property, we’re here to help.
We can provide you with free consultations to introduce you to a full range of experienced professionals (property specialists, mortgage brokers, solicitors, accountants and rental management agents). It’s a way to build a trusted team of professionals to set you on your own superannuation path.
With over 14 years of operational experience and exceptional client results, we’re sure you’ll find value in our service, regardless of your final super investment choice.
There is never any obligation, you won't ever need to pay a cent from your own pocket, and only when you decided to proceed with an SMSF, are we able to invoice you for any service. Everything is up front and there to help you make a truely informed choice.
To see if you qualify to use your super for property investment, click the button below.
QUICK FACT
The ATO reports SMSFs managed $49.8 billion in residential real estate in 2023.
The scale of this investment is equivalent to 100,000 properties valued at $498,000 each!
- * This post is for educational purposes only and is not intended to be financial advice
- * Property in a super fund can only be used for investment purposes
- * Neither you or your family or any related party can live or holiday in an investment property within your super fund
- * When considering set up of an SMSF, it's best to engage an Accountant that specialises in SMSFs
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