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Choosing the right superannuation fund is crucial for building a secure retirement, and for most Australians, that decision involves selecting between retail and industry super funds. Each type of fund has its own structure, fee levels, investment options, and features that can impact long-term retirement savings. Knowing the key differences between these two fund types will help you make an informed choice based on your individual needs, financial goals, and investment preferences.

In this blog post, we’ll break down the main distinctions between retail and industry super funds, discussing their fees, investment options, insurance offerings, and other features.

Overview of Retail and Industry Super Funds

Retail super funds are typically operated by financial institutions, banks, and investment firms. They are often open to the public and are profit-oriented, meaning they aim to return profits to shareholders. Retail funds offer a wide range of investment options, making them appealing to members looking for greater control over their super investments.

Industry super funds were initially created to benefit workers in specific industries, though many are now open to the public. These funds are often run on a not-for-profit basis, with the aim of returning profits to members rather than shareholders. Industry funds are known for their low to moderate fees and simple investment options, which make them attractive to members who prefer a straightforward, low-cost approach.

FEATURE	RETAIL SUPER FUNDS	INDUSTRY SUPER FUNDS
Profit Orientation	For-profit, with profits for shareholders	Not-for-profit, with profits returned to members
Fees	Generally higher, with more variable fees	Generally lower, with fewer administration fees
Investment Options	Wide range of options, including direct shares	Limited options, often default “balanced” funds
Membership	Open to the public	Many were initially restricted but are now open
Advice and Support	Often linked to financial advice services	Limited in-fund advice, but some funds offer it
Insurance Options	Typically broader range of insurance cover	Basic insurance cover, often cost-effective

Fees and Costs

Fees are one of the most significant factors impacting superannuation balances over the long term. Retail and industry super funds differ considerably in their fee structures.

Retail Super Funds: These funds generally have higher fees, including administration fees, investment management fees, and sometimes advisor fees. While retail funds offer more investment choice, these additional options can come with higher fees that impact returns over time.
Industry Super Funds: Known for their low-cost structure, industry funds typically have lower fees due to their not-for-profit orientation. By returning profits to members, they may have lower administration and investment fees. This cost-effectiveness can make industry funds attractive, especially for members who prefer a low-cost, hands-off approach.

Tip: When comparing fees, look for information on administration, investment, and advisory fees, and review fee disclosures to understand total annual costs.

Investment Options and Control

Investment choice is another key distinction between retail and industry super funds.

Retail Super Funds: Retail funds usually offer a wide variety of investment options, including different asset classes, direct shares, managed funds, and sector-specific options (e.g., technology, healthcare). This flexibility can be ideal for members who want to actively manage and customise their super investments.
Industry Super Funds: Typically, industry funds offer fewer investment choices. Many default to balanced options, which include a mix of shares, property, bonds, and cash. While some industry funds now offer a selection of investment options, they generally provide fewer choices than retail funds. This approach suits members who prefer a simple, diversified portfolio without having to make many investment decisions.

Tip: Consider your comfort with investment decision-making. Retail funds offer more control, while industry funds provide simplicity.

Profit Orientation

The profit orientation of each fund type affects how they manage funds and distribute returns.

Retail Super Funds: Retail funds operate as for-profit entities, which means they aim to generate profits for shareholders. This model can lead to higher fees and may result in lower net returns for members.
Industry Super Funds: Industry funds operate as not-for-profit entities, meaning any profits are reinvested back into the fund for the benefit of members. The not-for-profit model helps reduce fees and often results in better net returns for members over time.

Tip: If fee reduction and net returns are priorities, an industry fund’s not-for-profit model might be a better fit.

Insurance Options

Both retail and industry super funds offer insurance coverage, usually including life insurance, Total and Permanent Disability (TPD) cover, and income protection insurance.

Retail Super Funds: Retail funds often provide a broader range of insurance options, allowing members to customise coverage levels and select from a variety of insurers. This flexibility can be beneficial for those with specific insurance needs.
Industry Super Funds: Most industry funds provide basic, default insurance at competitive rates, as part of their commitment to low-cost services. Although coverage may be less customisable, it can provide essential protection at a lower cost, making it ideal for members who only need basic insurance.

Tip: Evaluate your insurance needs and compare the cost and scope of coverage options between fund types.

Accessibility and Membership Requirements

While retail funds have always been open to the general public, industry funds were initially restricted to workers in specific sectors, such as construction or healthcare. However, many industry funds are now available to anyone, expanding access to the benefits of not-for-profit superannuation.

Retail Super Funds: Open to the public with no membership restrictions.
Industry Super Funds: Originally industry-specific, but most are now open to the general public, allowing more people to benefit from their low-cost structure and investment strategies.

Advice and Support Services

Superannuation funds may offer access to financial advice and support, though the level of service can vary significantly between retail and industry funds.

Retail Super Funds: Retail funds often have partnerships with financial advisers, providing personalised advice on investments, insurance, and retirement planning. However, adviser fees may be charged for these services, either directly or through the super fund.
Industry Super Funds: While most industry funds offer limited advice services, some provide “intrafund” advice, which focuses on superannuation-related issues. For members needing comprehensive financial advice, industry funds may lack the full suite of advisory services found in retail funds.

Tip: If you prefer ongoing personal financial advice, a retail fund with linked advisory services may be suitable, although a financial adviser could also help with industry fund options.

Performance and Returns

When comparing super funds, performance is one of the most important factors to consider. While past performance doesn’t guarantee future results, consistent performance history can provide insight into fund management.

Retail Super Funds: Retail funds’ performance varies, and fees can impact net returns. Members with a specific investment strategy or those using actively managed options might see varied results based on market conditions.
Industry Super Funds: Many industry funds have a strong performance record, particularly those that use a balanced investment approach. They tend to perform well due to their low fees and the not-for-profit model, which reduces cost drag on returns.

Tip: Compare the net returns (after fees) rather than gross returns. Websites like the ATO’s YourSuper comparison tool can help evaluate long-term performance across funds.

Choosing Between Retail and Industry Super Funds

When deciding between retail and industry super funds, consider your personal circumstances, investment preferences, and financial goals:

Retail Super Funds May Be Suitable For:
- Individuals who want a wide range of investment options.
- Those comfortable with higher fees for personalised features or advice.
- Members looking for more control over insurance and investment customisation.
Industry Super Funds May Be Suitable For:
- Members prioritising low fees and straightforward investment options.
- Those who prefer a “set-and-forget” approach with a balanced investment option.
- Individuals seeking cost-effective insurance cover and not-for-profit benefits.

Conclusion

Both retail and industry super funds offer unique advantages, with each catering to different financial preferences and retirement goals. Retail super funds provide a wide array of investment options, customisable insurance, and linked financial advice but often come with higher fees. Industry super funds, on the other hand, tend to have lower fees and focus on delivering strong, consistent returns for members through a not-for-profit structure.

Choosing the right super fund depends on your comfort with fees, desired level of investment control, need for advice, and long-term retirement goals. By evaluating these factors and comparing options, you can select the superannuation fund type that best supports your financial future.