Types of Super Funds

When you start a job, you can usually either choose a super fund or let your employer choose for you.

Understanding the basics can help you work out what kind of account you get and whether it’s right for you.

If you want to choose your own — or change your account — there are lots of options.

Most funds offer a simple, low-fee option, called a MySuper product. This is the default product your employer will use for you.

Types of super funds

There are two types of super funds: defined benefit funds and accumulation funds. Most super funds are accumulation funds.

Accumulation funds

In an accumulation fund, your money grows or ‘accumulates’ over time.

The value of your super depends on the money that you and your employers put in (known as super contributions), and on the investment return generated by the fund after fees and costs.

Defined benefit funds

In a defined benefit fund, your retirement benefit is determined by a formula instead of being based on investment return.

Most defined benefit funds are corporate or public sector funds. Many are now closed to new members.

Typically, your benefit is calculated using:

  • the money put in by you and your employer
  • your average salary over the last few years before you retire
  • the number of years you worked for your employer


MySuper 

MySuper is a type of product you can have with a super fund.

It’s the default product that your employer will pay your super into, unless you choose a different option.

MySuper products typically offer:

  • lower fees
  • simple features — so you don’t pay for services you don’t need
  • either a ‘single diversified’ or a ‘lifecycle’ investment option

Even if you’ve already chosen a super investment option within your existing fund, you can choose to move to a MySuper option.

Compare MySuper products

You can find out about and compare MySuper products by using:


What to do if your MySuper product is underperforming

If you have a MySuper product, your super fund must let you know if it has performed badly under an annual performance test done by the Australian Prudential Regulation Authority (APRA).

Super fund categories

Most super funds fall into one of the following categories: retail, industry, public sector or corporate.

Retail super funds

Retail funds are usually run by banks or investment companies. Anyone can join.

Main features:

  • They often have a wide range of investment options.
  • They may be recommended by financial advisers who may charge a fee for their advice.
  • Most range from medium to high cost, but many offer a low-cost or MySuper alternative.
  • The company that owns the fund aims to keep some profit.


Industry super funds

Anyone can join the bigger industry funds. Smaller funds may only be open to people working in a certain industry, for example, health.

Main features:

  • Most industry funds are accumulation funds. A few older industry funds still have defined benefit members.
  • They generally range from low to medium cost, and most offer MySuper products.
  • They are profit-for-member funds, which means profits are put back into the fund.


Public sector super funds

Public sector funds are for government employees.

Main features:

  • They usually have a modest range of investment choices.
  • Newer members are usually in an accumulation fund. Many long-term members have defined benefits.
  • They generally have low fees and some offer MySuper products.
  • Profits are put back into the fund.


Corporate super funds

A corporate fund is arranged by an employer for their employees.

Some large companies operate a corporate fund under a board of trustees who they appoint. Other corporate funds are operated by a retail or industry fund, but are only available to that company’s employees.

Main features:

  • Those managed by a bigger fund may offer a wider range of investment options.
  • Some older corporate funds have defined benefit members, but most others are accumulation funds.
  • They are generally low to medium cost funds for large employers, but may be high cost for small employers.
  • Corporate funds run by the employer or an industry fund will usually return all profits to members. Those run by retail funds will keep some profits.


Self-managed super funds

A self-managed super fund (SMSF) is a private super fund that you manage yourself. SMSFs are different to industry and retail super funds.

To weigh up the pros and cons of managing your own super fund, check out our self-managed super funds article.

When all feels overcomplicated, you can always hire a specialist. Our team of financial advisers and accountants will be happy to sort everything out for you. Contact us today.

Information source www.moneysmart.gov.au

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Factual Information Only Disclaimer

This website contains factual information only and does not consider your personal circumstances, needs, objectives or financial situation. This factual information is not intended to imply any recommendation or opinion about a financial product. This information does not constitute financial advice or taxation advice, and the general nature of the content might not be applicable to you or your situation. Before acting on any information, you should seek professional advice and verify our interpretation/s before relying on the content or calculators within this website, while also considering its appropriateness in relation to your personal situation.

Notice

ASIC is simplifying the superannuation and retirement planner calculators while undertaking a scheduled review of assumptions.

As of 17 April 2020, these calculators will use a single set of assumptions.

The default assumptions in this calculator are based on Treasury’s long-term retirement income models. For more information on Treasury’s long-term retirement income modelling assumptions see the 2019 Treasury Research Institute paper ‘Accumulation of superannuation across a lifetime’.

Assumptions

The calculator works for accumulation funds only. It will not work for defined benefit funds.

We assume your account balance will receive all income and outgoings mid-year, apart from Government co-contributions which we assume are received at the end of the year.

Results are in today’s dollars

Results are shown in today’s dollars, which means they are adjusted for inflation.

Inflation assumptions

We make the following default assumptions on inflation (which you can change under the ‘Advanced  – insurance and inflation’ section that appears below calculator results):

  • 2.5% each year due to the rising cost of living (CPI inflation)
  • A further 1.5% each year due to the cost of rising community living standards


Contributions

We assume that your employer contributes an amount equal to 10.5% of your ordinary time earnings (you can change this in ‘You and your super fund’).

In future years we assume that:

  • Your employer and voluntary contributions will increase with inflation
  • You will satisfy the Work test at older ages and so are able to contribute
  • From 1 July 2021, the SG rate used for the default employer contribution rate is 10%. The SG rate is assumed to increase by 0.5% per annum until the SG rate reaches and stays at 12% from 1 July 2025 onwards.


Investment return

We make the following default assumptions for investment return and earnings tax:

  • Investment return before investment fees and earnings tax of 7.5% each year
  • An effective tax rate on investment earnings of 7.0%.

Actual returns will vary significantly from year to year and could be negative in some years, particularly for investment mixes where more is invested in shares and property. This calculator does not allow for such variations. You can vary assumptions in ‘You and your super fund’ and ‘Compare alternative fund’.

There is a lot to consider when comparing investment options between funds. Risk and return objectives and asset allocation within investment options may differ between funds and should be taken into account when comparing funds.

Further information

  • Super contributions must remain in super until you have met a condition of release. Weigh up the benefits of extra super against your other priorities, for example paying off your credit cards.
  • You will need to refer to your latest super account statement.

Disclaimers

  • This is a model, not a prediction.
  • The results from this calculator are based on the limited information that you have provided and assumptions made about the future. The amounts projected are estimates only provided by this model and are not guaranteed.
  • This calculator cannot predict your final superannuation benefit with certainty because this will depend on your personal circumstances including unexpected events in your life and external factors such as investment earnings, tax and inflation. This calculator assumes that you can make steady, predictable contributions and that all assumptions including these external factors will operate at set, steady rates for as long as you remain in the fund, even if events turn out differently from what’s assumed. These assumptions are essential so the calculator can show the effect of things you may be able to control, such as choosing a low-fee fund.
  • You should consider updating the projections provided by this model regularly as your circumstances may have changed. You can also change and update some of the assumptions to reflect your personal circumstances.
  • Do not rely solely on this calculator to make decisions about your retirement, there may be other factors to take into account. Consider your own investment objectives, financial situation and needs. You may wish to get advice from one of our licensed financial advisers.

How do I find my TFN?​

If you do not know your tax file number you can locate it via your income tax assessment, employee payment summaries, MyGov online account or you can call the ATO directly on 13 28 61 and request it over the phone.

Why we require your Tax File Number (TFN)?

Lost Super Finder will use the ATO portal to track down your Lost and Missing super accounts. Without a valid TFN being supplied, we are unable to complete the superannuation search for you.