When you start a job, you can usually choose a super fund or let your employer choose for you.
Understanding the basics can help you work out what kind of account to get and whether it's right for you.
If you want to choose your own — or change your account — there are plenty of options.
MySuper or choice super
In Australia, your super can be paid into a MySuper or choice super account. Check with your super fund if you're not sure what type of account you have.
Most super funds offer a simple, low-fee option, called a MySuper product. This is the default product your employer will use for you unless you choose a different option.
MySuper accounts generally have 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.
Super funds also offer a range of ways to invest your money in super, including pre-mixed investment options in assets such as shares and property.
These investment options are called 'choice' super products. You actively make a choice about where your super in invested, rather than going with the default MySuper option.
For help choosing investments in your super, see super investment options.
Accumulation or defined benefit funds
There are two kinds of super funds: accumulation funds and defined benefit 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
- 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.
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.