Types of superannuation funds
There are three main types of super funds:
These were originally set up for an industry (such as the public sector) or profession (lawyers, for instance). Many of these are now available to the general public. They are not-for-profit companies that are run for the benefit of members.
Retail funds are run by the large finance companies that are well known to most of us through advertising and through company super funds. These are public companies that are run for the benefit of shareholders.
Self Managed Super Funds (SMSFs)
SMSFs have really taken off in Australia with the advent of the GFC, when many saw their savings in traditional funds dwindle. With an SMSF, you own investments directly, rather than being in a pooled fund. The advantages are many: You have a greater number of investment options, you can pool family assets, you can take advantage of franking credits and thereby lower your taxes.
There is now around $1.5 trillion in SMSFs in Australia, with over 500,000 SMSFs. The growth in this sector has been to the detriment of retail funds, which are now starting to offer hybrid options or wraps where you own the underlying investments while the fund retains trusteeship. If you look at this option, be sure to check the fees first as some can be hefty.
Find out more about Self Managed Super Funds.