Industry vs Retail Super Funds: Key Differences Explained
Synopsis
Choosing between an industry and retail super fund can affect your fees, investment options, insurance cover, and long-term retirement savings. This guide explains the key differences between the two fund types, how they are structured, and which option may suit different types of Australian super fund members.
Selecting a superannuation fund is one of the most critical financial decisions that Australians can make, but many people do not know the distinction between industry and retail super funds. While both super funds have the objective of helping customers save for their retirement years, they differ from one another in terms of ownership structure, fees, investment options, and profit utilization.
Understanding the key differences in comparing industry vs retail super funds can help you in determining which fund best serves your financial interests and investment choices.
What Are Industry Super Funds?
Initially, industry super funds were developed for workers of certain sectors such as health, construction, hospitality, and education. Currently, most of the industry super funds are open to the general public; hence, anybody can join them regardless of occupation.
The main trait of industry super funds is that they operate on a not-for-profit basis. The profits generated by these funds are reinvested by the funds for the interests of their members as opposed to being distributed to the shareholders of the funds.
Here are some of the largest industry funds in Australia:
AustralianSuper
- Australian Retirement Trust
- REST
- Aware Super
- HESTA
Industry funds with low to medium fees and simplified investment options, recommended for longer-term superannuation savings.
What Is a Retail Super Fund?
Retail super funds are usually run by banks, wealth managers, insurers and investment businesses. Most retail funds are open to anyone, just like industry funds.
The major difference is ownership.
Retail funds are typically managed by profit-making financial institutions. They look to provide good returns for members, but part of the profits may also be paid to shareholders in a parent company.
Some well-known retail providers are:
- AMP
- Colonial First State
- MLC
- OnePath
Retail funds generally offer wider investment options, platform investing and adviser-linked options for members searching for a little more flexibility.
Industry vs Retail Super Funds: Quick Comparison
| Feature | Industry Super Funds | Retail Super Funds |
| Ownership | Not-for-profit | For-profit financial institutions |
| Profits | Returned to members | May be shared with shareholders |
| Membership | Mostly open to everyone | Open to everyone |
| Fees | Typically low to medium | Can range from low to high |
| Investment Options | Generally simpler | Often broader and more flexible |
| Financial Advice | Available but may be limited | Often integrated with advice services |
| Insurance | Standard insurance options | Wider variety in some cases |
The choice isn't always about which type is "better" but rather which is more suitable for your needs.
Are Industry Super Funds Cheaper Than Retail Funds?
So we're clear: industry funds are typically in the low-to-medium fee range, and retail funds can be one of those as well, but it depends entirely on which product you're dealing with, specific to your level's directions.
But the gap is not as wide now as it once was.
The latest iteration of MySuper products at a low cost from many retail providers, while other premium retail platforms have higher fees and add value via access to financial advice as well as broader investment options or portfolio management tools.
Key Takeaway: When comparing funds, seek the following:
- Administration fees
- Investment fees
- Advice fees
- Insurance costs
- Performance fees
If you will be using the services offered, a fund with somewhat higher fees cannot always still constitute value.
Do Industry Funds Perform Better Than Retail Funds?
Historically, industry funds tend to outperform retail funds on average, especially where they make up all or part of a default MySuper product. But this doesn’t mean all industry funds will deliver better returns than all retail funds, nor do all investment options perform equally well.
For years, industry funds have been championing the benefit of their not-for-profit structure, reducing costs with a focus on longer-term member outcomes. In some comparisons, industry funds have shown higher average long-term returns than retail funds, but remember, as ever, you can’t guarantee tomorrow’s result based on yesterday’s outcome.
That said, it seems like there are plenty of strong-performing funds on each side.
Instead, you can use these factors to determine if an industry fund is right for your situation.
Compare long-term performance, fees, risk levels, investment strategy, services provided and other details.
During industry fund performance comparison, focus more on the individual funds instead of just general categories.
Investment Choice and Flexibility
One area where retail funds often sort of stand out is the investment choice bit.
Many retail funds provide, for example:
- Extensive investment menus and similar selection
- Managed funds
- Direct share investing
- Exchange-traded funds (ETFs)
- Adviser-managed portfolios
These parts can be quite attractive to investors who want more say on how their super is actually invested.
Industry funds also do provide investment choices, but many of them lean toward simpler menus, aimed at longer-term investors who prefer a more hands-off style.
So if investment flexibility matters a lot, a retail fund might hand over more options, overall.
Which Type of Fund Has Better Insurance?
Insurance is sometimes, like, overlooked when people compare super funds, but honestly it can end up being a really solid benefit.
Most of the time, both industry funds and retail funds have some version of :
- Life insurance
- Total and Permanent Disability (TPD) insurance
- Income protection insurance
What ends up being the best choice really depends on your situation, like:
- Your occupation
- Your health status
- What coverage you actually need
- How the premium costs stack up
Some retail funds offer more flexibility and customisation, while industry funds may run with more competitive group insurance arrangements. There is not one clear winner for everyone, so it is important to compare the insurance bits carefully before you switch super funds.
Can Anyone Join an Industry Super Fund?
One common misconception is that industry funds are only available to people working in certain professions.
While this was kinda true historically, a lot of industry funds are now public-offer arrangements that basically anyone can join, regardless of their occupation. And yes, that part matters.
So in practice, Australians generally have access to both industry and retail super funds, and they can choose based on the features rather than on their employment sector. It’s more about what you want from the fund, not where you work.
Who Should Consider an Industry Super Fund?
An industry fund could be a good match for people who:
Prefer a simple super solution
- Want competitive fees
- Care about long-term retirement investing
- Do not need a whole lot of investment choice
- Value a not-for-profit structure
Many Australians stay with industry funds for their working lives, because they tend to offer straightforward investment options, and also competitive long-run performance.
Who Should Consider a Retail Super Fund?
A retail fund might be suitable for people who:
- Want wider investment options
- Work with a financial adviser, kind of
- Prefer platform-based investing
- Need specialised investment choices
- Want more portfolio customization
Retail funds can be especially appealing for members who have more complicated financial situations, and who like cohesive advice as well as investment management services.
Which Is Better: Industry or Retail Super?
There isn’t one single answer that fits for everybody.
The best super fund for you depends on things like your financial goals, your risk tolerance, what you actually want to invest in, if you need advice, plus insurance requirements and how sensitive you are to fees too.
For some Australians, an industry fund with its low-cost, member-focused setup might be the right call, kind of straightforward. For others though, the extra flexibility and the wider investment choices you can get via retail funds may be worth the higher fees, even if it feels a bit more expensive.
So instead of picking based just on the fund type, compare the specific product, the fees, the past performance, the insurance cover, and the investment options, okay.
Conclusion
While discussions about industry vs retail super funds frequently focus on fee structures and investment performance, there’s much more at play when it comes to making the right choice for you.
Industry funds typically function on a not-for-profit basis, offering simplicity with competitive fees, and retail super funds provide more flexibility along with access to a wider variety of investments and integrated financial advice services.
Consider your own needs and weigh up each fund individually rather than falling into generalisations. Look at fees and performance and explore what’s available in terms of insurance and investments – this way you’ll be able to choose a super fund which supports your longer-term retirement objectives.
FAQs
What is the difference between industry and retail super funds?
Industry super funds usually work on a profit-for-members basis - which means that their profits are returned to members. Retail super funds are typically run by financial institutions that distribute some of their profits to shareholders, but can provide you with a larger selection of investment options.
Are industry super funds cheaper than retail funds?
Fees for industry funds are typically lower to medium, whereas the fees charged by retail funds can vary considerably from low to high, based upon the types of products and services they offer. As with most products, there is variation in the level of fees charged across different funds, so comparisons need to be considered individually.
Do industry super funds perform better than retail funds?
There has been historical evidence that some industry funds have performed very strongly over the longer term, though this clearly differs greatly amongst all individual funds (and their investment options). Consideration of past performance should not be the only focus point when considering a super fund.
Can anyone join an industry super fund?
Most industry funds were created for people working within their particular industry, but they're generally open to the general public - so you should be able to sign up anytime!
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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