Industry Fund, Retail Fund or SMSF – which is the best option for you?

Summary

Superannuation is one of the most important financial assets in the lives of Australians, so ensuring that we're using it to the best of our ability is crucial for creating a more secure and enjoyable retirement. When it comes to choosing between an Industry Fund, Retail Fund or a Self-Managed Super Fund (SMSF), there are a few factors to consider including investment performance, fees and costs, investment options and more. We've outlined some key points below to help you find what may best suits your needs.

Content

Superannuation is one of the most important financial assets in the lives of Australians, so ensuring that we’re using it to the best of our ability is crucial for creating a more secure and enjoyable retirement.

When it comes to choosing between an Industry Fund, Retail Fund or a Self-Managed Super Fund (SMSF), there are a few factors to consider including investment performance, fees and costs, investment options and more.

We’ve outlined some key points below to help you find what may best suits your needs.

Industry Fund

Industry funds are generally not-for-profit, and are run to benefit their members, not shareholders. Typically an accumulation fund, their purpose is as the name suggests - to ‘accumulate’ your money over time from investment returns and as you and your employers make contributions.

Advantages include:

May offer lower fees As these funds are run for members, they can typically offer you lower fees as profits made are returned to their members.

Performance history Industry super funds can offer competitive performance for its members, but it’s always best to do your own research as past performance is not a guarantee of future results.

Less administration Compared to an SMSF, these funds require less personal administration. There is also less compliance risk as the responsibility falls on the fund.

In an industry fund, it’s important to note that there are limitations to the number of investment options, features and control available to you.

SMSF

An SMSF is a private superannuation fund that you manage yourself, and must have a minimum of two trustees and a maximum of six.

A trustee takes the full legal responsibility for all decisions made in the SMSF, and is required to stay up to date with the everchanging and complex superannuation and tax laws.

Advantages include:

You have a greater range of investment choice You have the ability to invest in a range of investments including direct assets (such as property), and non-traditional assets, such as (business real property).

It can be more tax efficient You may be able to time the purchase and disposal of your assets to minimise any capital gains tax liabilities.

You have greater flexibility around estate planning SMSFs provide far greater flexibility around estate planning issues than any other super fund, making it easier for you to transfer your wealth to future generations in a tax-effective manner.

It gives you asset protection Your assets are protected on bankruptcy or litigation, which may be of particular interest to you if you’re a small business owner.

Other factors to consider are whether you have enough money (this is estimated to be around $200,000) and time to make running an SMSF effective.

Retail Fund

Retail funds are typically run by financial institutions like banks and investment companies, with profits made being returned to their shareholders. They offer members a greater range of investment and product choices than what’s available with an industry fund, however, typically offer higher administration fees.

Advantages include:

More choice Retail funds allow members greater control, more features and a larger range of investments to choose from.

Greater flexibility around estate planning Like an SMSF, retail funds provide more flexibility around estate planning meaning you can choose a stronger beneficiary nomination. Less compliance risk Like an industry fund, there is less compliance risk as responsibilities fall on the fund. Although this fund provides more choices, you cannot purchase direct property or business assets like you can through an SMSF.

Individual circumstances heavily influence what superannuation option is most suitable, so what may work for a friend or family member, may not be what’s best for you. Industry super funds, retail super funds and SMSF’s are the most common options that are available.

Take the time to do your own research and if you require a professional’s input, consult your financial adviser.