Types of super funds

Are you my type?

There are many types of super fund, each is a bit different. Knowing the different types of fund will make it easier for you to choose a fund. Super funds can be grouped into a number of categories.

MySuper

Many super funds offer a new type of account called MySuper. MySuper has replaced most existing default accounts offered by super funds. If you don't choose a super fund yourself your employer must pay your employer contributions into a MySuper account.

MySuper accounts offer:

  • lower fees (and restrictions on the type of fees you can be charged)
  • simple features so you don't pay for services you don't need
  • a single diversified investment option or a lifecycle investment option.

MySuper is only offered for accumulation funds, not for defined benefit funds and does not apply to accounts in pension phase. Retail, industry and corporate funds can all offer MySuper accounts.

MySuper investment options

There are two ways super funds can manage your investments through MySuper accounts. They will either use a single diversified investment strategy or a lifecycle investment approach.

Single diversified investment strategy

This is how most MySuper options work. If you do nothing, your money will be put in a standard mix of investments and the risk-reward approach will stay the same for your whole life.

Check with your super fund to find out about their investment approach. It is common for these funds to have a balanced/growth approach to investing with 70% of assets in growth (e.g. shares and property) and 30% in defensive investments (e.g. cash and fixed interest).

Lifecycle investment approach

Super funds that offer a lifecycle option will move your money from growth investments when you're young to more conservative investments when you're older. The goal is to take on more risk when you're young because you have time to ride the ups and downs of financial markets. Then, as you get older, your super fund will reduce your risk to secure what you've built up over your working life.

You don't have to make any changes yourself with a lifecycle option - your fund automatically changes your investment strategy for you.

This table shows you an example of a typical investment mix with a percentage of your super savings in growth and defensive assets, depending on your age.

Typical mix for a lifecycle investment strategy

Age Growth Defensive
Under 45 85% 15%
45-54 75% 25%
55-64 55% 45%
65 or older 40% 60%

Find out more about super investment options.

Getting a MySuper account

If you haven't chosen your super fund in the past and you have just gone with the fund your employer selected, your super will have been automatically transferred into a MySuper account.

If you are in a defined benefit fund, or you have invested in certain legacy products, you will not be transferred to a MySuper account. Ask your super fund if you are not sure where you stand or you want more information. If you have already chosen a super investment option within your existing fund you can choose to move to a MySuper option if you want.

To find fund options, search the MySuper funds list.

MySuper funds list

Contact your super fund to see if MySuper is right for you. See choosing a super fund to find out more about your options.

Retail funds

Retail funds are usually run by banks or investment companies. Anyone can join these funds.

The main features are:

  • They often have a large number of investment options, sometimes in the hundreds.
  • They are usually accumulation funds.
  • They are usually recommended by financial advisers who may be paid for their advice by fees and/or a commission (commissions are being phased out).
  • Most retail funds range from mid to high cost, but some offer a low cost or MySuper alternative.
  • The company that owns the fund aims to retain some profit.

Industry funds

The larger industry super funds are open for anyone to join. Some others are restricted to employees in a particular industry.

The main features are:

  • They usually have a smaller number of investment options, which will meet most people's needs.
  • Most funds are accumulation funds, a few older funds still have defined benefit members.
  • They are generally low to mid cost funds and some offer MySuper accounts.
  • They are 'not for profit' funds which means profits are put back into the fund for the benefit of all members.

Public sector funds

Public sector funds were created for employees of federal and state government departments. Most are only open to government employees.

The main features are:

  • Some employers contribute more than the 9.5% minimum.
  • They have a modest range of investment choices that will meet most people's needs.
  • Many long-term members have defined benefits, newer members are usually in an accumulation fund.
  • They generally have very low fees and some offer MySuper accounts.
  • Profits are put back into the fund for the benefit of all members.

Corporate funds

A corporate fund is arranged by an employer, for its employees.

Some larger corporate funds have an employer who also operates the fund under a board of trustees appointed by the employer and employees. Other corporate funds may be included as a separate part of a large retail or industry super fund (especially for small- and medium-sized employers).

The main features are:

  • Those managed by a larger fund may offer a wider range of investment options.
  • Some older corporate funds have defined benefit members, most others are accumulation funds.
  • They are generally low to mid cost funds for large employers but may be high cost for small employers.
  • Funds run by the employer or industry fund will usually return all profits to members, while those run by retain funds will retain some profits.

Eligible rollover funds

An eligible rollover fund (ERF) is a holding account for lost members or inactive members with low account balances. These funds cannot receive employer contributions. 

Just like ordinary super funds, some ERFs have low investment returns and may charge high fees, while others have good returns and low fees.

Some ERF providers will try to find your active super fund as your money is likely to grow faster if you consolidate your ERF with your active super fund.

Self-managed super funds

These funds are discussed in detail on the self-managed super fund (SMSF) webpage.

The difference between accumulation and defined benefit funds

Accumulation funds

Most Australians have their super in an accumulation fund. They are called 'accumulation' funds because your money grows or 'accumulates' over time.

The value of your super depends on the investment option you choose, as well as how much money:

  • your employer contributes
  • you deposit in extra contributions
  • you receive in bonus contributions
  • the fund earns from investing your super
  • you are charged in fees.

Investment profits are added to your account, and investment losses are taken out.

Important

In an accumulation fund you bear the risk that your super payout will be lower if financial markets drop.

Defined benefit funds

Smart tip

Never leave a defined benefit fund unless you're very sure you will be better off. Some of these funds are very generous.

Defined benefit funds are less common than accumulation funds. Most defined benefit funds are corporate or public sector funds, and many are now closed to new members. 

The value of your retirement benefit is defined by the fund rules and depends on:

  • how much money your employer contributes
  • how much extra you contribute
  • how long you have worked for your employer 
  • your salary when you retire.

For example, after 25 years' membership, your retirement benefit might be worth:

  • five times your final salary, as a lump sum, or 
  • 75% of your final salary, as a monthly payment until you die.

Get professional advice if you're considering changing from a defined benefit fund to an accumulation fund. Once you leave, you can't get back in. Often defined benefit funds are the better option.

Important

In a defined benefit fund your employer or the fund generally takes on the investment risk. But be aware that defined benefit funds can be affected by market downturns, and some employers or funds may have difficulty taking on the market risk.

If you're thinking about changing funds, start by working out where you stand now. Different types of funds have different features and drawbacks. Knowing the type of super fund you're in will help you make informed decisions about your super savings. 


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Last updated: 12 Feb 2019