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What Super Fund is Best for You

4 Sep 2011 |

It is common for someone to have different types of superannuation funds over their working life. When someone is starting off and they do not have a great deal in superannuation some of the cheaper no-frills options can be best. As a person gets older and accumulates more in superannuation, a more expensive but flexible superannuation fund is chosen.

The best way I know of comparing the four options available is to stress the point that a superannuation fund is an investment vehicle. Just like the choices a person faces when selecting the make and model of car they own, the defining features of the different types of superannuation funds are very similar.

MySuper accounts

These accounts will be offered by both industry and commercial superannuation funds. They will be similar to the base model offered by car manufacturers such as a Falcon, Commodore, or Corolla. They don’t have many options or features, the driver doesn’t need a lot of help in driving it, they are inexpensive to maintain, and will get you to your destination.

As MySuper accounts will be offered widely, and because each provider of a MySuper account must clearly detail all of the costs and performance of the member’s account, it should be relatively easy to determine which MySuper account is best for you. This will most likely be the best model for someone who is just starting their superannuation journey.

Industry superannuation funds

This type of superannuation fund has in many cases seen the greatest development and improvement over recent years. They were originally like the base model offered by the major care manufacturers with very few options and in some cases not being that reliable or pleasant to drive.

In some cases industry funds have improved their levels of service and options a member has, similar to what is happening to some Asian car manufacturers that started off with cars that were regarded as cheap and nasty but are now regarded as producing good quality vehicles.

Commercial funds

This is the model of superannuation and that is often a lot more expensive but it appeals to people who want a bit more performance from their superannuation. They often offer a great deal more choices and options when it comes to investing, but this increased choice often comes at the cost of member requiring professional help which adds to the cost.

As is the case with a car if the right model has been chosen, and the advice received comes from a professional advisor not driven by commissions, someone with a commercial superannuation fund can experience better performance despite the extra costs.

Self managed super funds

These are the 4×4 model of superannuation funds. They offer almost unlimited options, the flexibility to go to where ever you want when it comes to investing, and they’ll get you where you want to go when it comes to superannuation and retirement.

Due to the number of options they have, and because they really are a specialist vehicle, they require more professional help in driving and maintaining them. If they are used without getting the proper help, although money may be saved, they can end up being used incorrectly and cost the members dearly.

They mainly suit superannuation fund members with large superannuation balances that want to have greater control over their own financial and superannuation destiny. They have grown in popularity to the point where the funds held by SMSFs make them the largest type of super fund.

IN CONCLUSION

When a person is in the early stages of accumulating their superannuation the new MySuper account should be the best option. As their superannuation balance increases, and they want to have a greater say in the management of their superannuation funds, an industry or a commercial super fund may suit.

An SMSF is really the only choice when a person wants to have the greatest say in their own superannuation destiny and to invest in the following direct investments:

  • residential property;
  • commercial property;
  • works of art;
  • collectables;
  • first mortgages with solicitors;
  • buying unlisted investments such as private companies and unit trusts; or
  •  to joint venture in an investment with a member or related party.

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