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.
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
If you're thinking about leaving a defined benefit fund, get professional advice. Some funds are very generous, so make sure you'll be better off. If you leave, you can't rejoin.
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:
- the funds product disclosure statement (PDS) for the MySuper product
- the ATO's YourSuper comparison tool
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).
To help you make a decision about whether to switch funds and which product to switch to, you can use the ATO's YourSuper comparison tool.
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.
- 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.
- 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.
- 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.
- 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
To weigh up the pros and cons of managing your own super fund, see self-managed super funds.