What Super Is Best For You
The purpose of superannuation is to provide an income for someone who has retired. A Super fund is the entity/vehicle that allows people through their working life to accumulate their most valuable retirement asset in the most tax effective way. How much superannuation someone has when they retire depends on contributions, investment returns, administration costs, and investment costs.
These are four types of super funds, what they are and what they do.
MYSUPER ACCOUNTS
These super accounts act as a default when an employee fails to choose the super that their employee will contribute to. They are offered by both industry and commercial superannuation funds. They are more like deciding to take public transport as a vehicle to retirement, rather than owning your own car.
COMMERCIAL FUNDS
INDUSTRY SUPER FUNDS
Industry super funds are not for profit and have gone from being mainly protected, due to employees being forced to contribute to them depending on the industry, to them having to compete with other super funds. For a car analogy, they’ve gone from original Asian imports that were very basic with technology borrowed from other manufacturers, to being more refined and having more options.
Industry super funds often have lower administration costs and their investment performance often makes it a better performing vehicle over the long run. Care does need to be taken because, just like some makes and models of cars perform better than others, not all industry super funds and have the same overall performance.
Three areas that industry funds underperform compared to commercial funds and SMSFs are:
- Assisting and advising members,
- Being more bureaucratic in their administration, and
- Not having a wide choice of investment alternatives.
SELF-MANAGED SUPER FUNDS
Self managed super fs are the 4×4 model of the superannuation industry. They offer almost unlimited options when it comes to investing and, as long as superannuation rules are followed, flexibility in accessing benefits and accumulating wealth.
Just as there are many choices of brands 4×4 cars, there are many choices on how to set up and manage a self managed super fund. Care needs to be taken when choosing who to set up an SMSF and who assists with the administration of the fund.
