Choosing your super fund

Published in the Empower Magazine, July 2012 by Janine Cox

Do you truly believe you will retire wealthy on your super? 

When asked, most of us would say they either don’t know or they doubt their super will see them living the life they dreamed. 

For women, more often the super statistics indicate most will fall well short of the minimum needed. 

If you are well informed, however, it can make the difference between having a comfortable lifestyle and a mere existence.

For most, making decisions as to where you should invest your superannuation is not easy, because the choices are extensive. 

You would think that the financial industry would make it easy but it doesn’t, and the consequences of putting decisions off may be costly. If this is stopping you, seek professional assistance.

If you want to take control of your super, there is a number of options, including industry super funds, public sector funds, and self-managed super funds.

There is a lot of information on the internet to help you make informed decisions. 

If you find it more complicated than you first thought, you haven’t lost anything. In fact, you’ll have gained, because you will now be more prepared to ask the right questions.

Industry super funds

Industry funds hold billions of dollars under management, and were initiated to support members of specific unions. 

However, a number now have an open door policy, which allows anyone to invest. Industry funds work in a similar way to any unitised managed fund, but they are only for your superannuation.

The perceived attraction of industry funds is that because they are run for the benefit of the members, rather than shareholders, they offer lower fees.

Industry funds have conducted strong advertising campaigns around low fees, because they don’t pay financial planners any commission-as a result, you get higher growth. 

While lower fees sound great, without professional advice investors tend to make mistakes, resulting in lower returns.

Further, with FoFa reforms, we see changes in the industry where lower fees will no longer be a selling point, because financial advisers will be banned from taking commission.

Public sector funds

Public sector funds have been available for decades through banks, insurance companies and various managed fund organisations. 

Public super funds are simply another form of managed fund, with profits benefiting the shareholders not the members. 

These funds are run by companies such as AXA, AMP and BT and while fees can be higher, investment options and returns may be better.

Corporate supers come from companies structuring their own in-house superannuation fund for employees, and are similar to industry funds because they are run for the benefit of members (employees). 

Fees for both public and corporate supers are quite uniform, because legislation dictates the disclosure of fees.

Investment returns from industry and public funds are, in most cases, publicly available, but some industry fund returns can be difficult to obtain. 

Returns are generally found on their websites, though it is important to compare like with like, or your decisions maybe compromised.

Which is better?

Bear in mind that the name of a fund may not be provide a guide to what assets are included. 

For instance, a check of an Australian equities fund revealed that 50 per cent of assets were allocated to Australian equities, with the balance in various other assets.

Another anomaly is the reporting of returns in the press, and often on a comparison basis with the industry sector versus the public sector.

These are averaged returns, and individual funds may have performed better or worse, so it’s best to investigate the specifics of the fund you’re interested in. 

There have been many comparisons across public and industry funds, with both arguing that the outcomes are flawed because the performances are being measured on a basis hat is more suitable to a specific fund.

The bottom line is that you need to do your homework, because either type of und can have advantages depending on your circumstances and investment characteristics. If unsure, obtain professional advice.

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