There are many different superannuation types available on the market depending on the needs of a person. Superannuation is more than simply a percentage return that you see on your annual statement. Different superannuation types offer varying degrees of investment types, life insurance options, ancillary features and pension types. Superannuation funds also offer different levels of client reporting and customer service.
Superannuation is a vehicle that is important to families overall wealth creation, having the wrong superannuation type, invested incorrectly or under insured can result in an uncomfortable retirement. Prudent, personalised superannuation advice to find the right superannuation type, aligns the features and investments of a superannuation fund to the investment and wealth creation needs of the client to maximise the retirement outcomes.
There are a number of superannuation fund types available on the market;
Corporate (Employer) Superannuation
Corporate Superannuation funds are accounts set up specifically for a company under the umbrella of either an existing retail fund (e.g. Colonial First State) or an Industry Fund (i.e. Accountants Super).
Corporate Superannuation funds are only open to current employees of that company and offer varying levels of investment choice. A major feature of corporate superannuation funds is that employees are normally offered a level of automatic life insurance and in some cases income protection without medical underwriting which in most circumstances can be kept when they leave an employer (as long as the account stays open). Corporate superannuation funds depending on the size of the company may receive fee discounts for its employees and the size of the funds under management.
A major disadvantage of corporate superannuation funds is the restriction to current employees only. When an employee leaves the company, they will generally lose any fee discounts and will automatically be moved into the personal or retail division of the superannuation fund. This normally results in higher insurance premiums. As the transfer is normally done automatically, members need to ensure that contact details are correct otherwise there is a higher risk of ‘losing’ the superannuation monies. It is normally recommended if invested in a corporate or employer superannuation plan to review the superannuation account or seek superannuation advice to ensure that any changes in benefits and features are appropriate.
Industry Superannuation Funds
In the past, Industry Super Funds were restricted to employees of a specific industry (e.g. Accountants). More recently and with the development of ‘superannuation choice’ more industry funds are becoming ‘public offer’ superannuation funds, that is open to the public.
The features, fees, investments and flexibility of industry funds differ; however they are normally more limited in their offering compared to retail funds, commonly one or two investment options per segment. People looking for a simple, low cost method of investing may suit industry funds. A disadvantage of industry superannuation funds however is a tendency for multiple account fees, less transparent investments and a higher allocation to ‘unlisted’ investments which decreases liquidity within the fund and also makes ongoing valuation more difficult.
Retail Superannuation Funds (Master Trusts and Wraps)
Retail Superannuation Funds and ‘Wrap accounts’ are public funds offered normally by banks and large financial institutions. Retail funds tend to offer a wider range of investments, insurance and ancillary features than corporate superannuation and industry superannuation.
The fee structure within retail superannuation funds varies and although historically higher, in recent times retail funds have reduced their fee structures to be in line or in some circumstances more competitive than industry superannuation funds.
Retail superannuation funds can be suited to individuals who are looking for more involvement in their superannuation and want access to a wider range of investment choice. Tailored insurance options can also make retail superannuation attractive. A major advantage of retail superannuation funds is rather than having to change an entire superannuation account if performance lags or circumstances change, an investor has the ability to switch investment options.
Self-Managed Superannuation Funds
Self-Managed Superannuation Funds, known as SMSF’s are utilised for people who want the ultimate control over their retirement savings. SMSF’s are controlled by its members and is limited to a maximum of 4 members. The increased flexibility comes with increased responsibility, members also acting as trustees of the superannuation fund need to maintain their ongoing obligations to superannuation laws and are personably liable under those laws.
Self-Managed Superannuation Funds are able to invest in any investment allowed under superannuation regulations and includes, direct property, shares and collectables.
Self-Managed Superannuation Funds can be suitable for more astute investors looking to expand their investment capability beyond that offered by industry, retail and corporate superannuation. SMSF’s can also be suitable for business owners wanting to utilise superannuation funds to purchase real business property. It is recommended by the Australian Tax Office to hold a minimum balance of $200,000 before establishing a SMSF.
Questions? Email Primoris Financial here