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When it comes time to choose a super fund, do you know the difference between an ‘industry’ and a ‘retail’ fund?

At the end of the March 2019 quarter superannuation was a $2.8 trillion industry1, and is growing every day. Compare that to Australia’s total GDP which is sitting at $1.89 trillion (AUD) - doesn’t that put it into perspective! Super isn’t something that we can ignore and while you may only have a small slice of that $2.8 trillion, it’s likely to be one of your largest assets upon retirement.

Did you know, though, that not all super funds are created equal? There are some very important differences between retail and industry funds which could affect your final retirement income, and this handy guide will help you navigate the different types of superannuation funds.

Industry funds

Vision Super is an industry fund, and like many industry funds, our beginnings lie with trade unions and employer associations, whose aim was to provide Australians with a place to put away money for retirement. They are profit-to-member organisations and put members first in everything they do. Most industry super funds are now open to the public, so if you change your job you can still stay with Vision Super.

Retail funds

On the other hand, retail super funds are generally operated by financial institutions like banks and wealth management companies. They are usually recommended by financial advisers who may be paid for their advice by fees and/or a commission, though commissions are now being made illegal. Most retail funds range from mid to high cost, but some offer a low cost or MySuper alternative, and the company that owns the fund aims to make a profit2 before you get any investment returns.

The main difference between retail and industry superannuation funds is what they do with their profits. Retail super funds return their profits to shareholders and investors whereas industry super funds generally return profits to their members3.

Australian workers are well aware of this. In the 12 months leading to January 2019, industry super fund scored 62.1% satisfaction with financial performance, well above retail funds who scored only 57.3%4.

So why is this important?

When starting a new job, you’re given the choice to pick a super fund or to have your employer pay the contributions into the organisation’s chosen fund, creating a new super account in the process. Often you keep this account open for years, and if you don’t make sure it’s set up correctly for you, you might be paying extra for things you don’t need. So, it’s important to start off on the right footing with a good superannuation foundation.

Research by AIST has shown us that 19% of the retail super members they surveyed believed they were in an industry fund and a further 35% were either unsure or thought they were part of neither. Of those surveyed, half believed that going with the employer’s default fund means they’ll get put into an industry fund5, which often isn’t the case.

When you change jobs, you can take Vision Super with you. We’ll accept contributions from your new employer and you can continue with your account as you intended. Just give your new employer this form.

If you have a loved one who is in a non-industry fund, encourage them to research the differences and make the change to an industry fund.

Vision Super strives to put our members’ needs at the heart of our decision making. You can read further about our values here or call 1300 300 820 to talk to our friendly Contact Centre if you have any questions about superannuation.

1 https://www.superannuation.asn.au/resources/superannuation-statistics
2 https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/choosing-a-super-fund/types-of-super-funds
3 https://www.canstar.com.au/superannuation/industry-vs-retail/
4 http://www.roymorgan.com/findings/7888-superannuation-satisfaction-201902250519
5 http://www.aist.asn.au/media/1309749/understanding_the_decision-making_process.pdf

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