Given the role that superannuation plays in enabling a secure and comfortable retirement or non-working phase of your life, it is vital that you understand how it works and which types of superannuation funds are suitable for you to achieve the best possible outcome.
There are many types of superannuation funds, and each type is a bit different. Knowing the different types of funds will make it easier for you to choose the right one for you. Some examples of the different types of funds are:
- Retail funds: Usually run by banks or investment companies such as AMP, Westpac.
- Industry funds: Usually for employees in a particular industry i.e. healthcare and building.
- Public Service funds: Created for employees of Federal and State government departments.
- Self managed superannuation funds (SMSF): Run by the trustees and members of the fund.
- Small APRA fund (SAF): A fund with no more than six members, run by a professionally licenced trustee.
There are some important differences between these types of funds, particularly when compared to SMSFs.
The table below highlights some of the different and important features:
| Feature | Self managed superannuation fund | Traditional superannuation fund |
| Regulation | By Australian Taxation Office (ATO) | By APRA (Australian Prudential Regulation Authority) |
| Administration | Members are all trustees or directors of a corporate trustee. Each trustee is responsible for ensuring required administrative tasks are undertaken. | The appointed fund trustee acts on behalf of all members. Members have no involvement in the management or maintenance of the fund, except for a SAF (Small APRA Fund) which may allow some member involvement. |
| Investment choice | Wide investment choice, including direct property and some other assets not available to other super fund types. | Limited investment choice other than a SAF, which may offer some investment choice. |
| Costs | SMSFs with small account balances are less cost-effective than SMSFs with larger account balances (say $200,00 or more). SMSFs with larger balances are more likely to be competitive with other types of funds. | There may be higher costs for members with large account balances in this type of fund when compared to an SMSF. |
| Winding up the fund |
Fund may need to wind up (early) if members leave the fund, die or lose capacity. When winding up an SMSF trustees are responsible for selling fund assets to pay benefits to departing members, arranging finalisation of financial statements, tax returns and other tax and compliance obligations. |
Members instruct the fund to pay benefits as a pension or as a lump sum. On winding up; the fund does all administration and deducts costs from member benefits. |
| Compensation / avenues of recourse |
In most cases the SMSF trustees initiate any action required. This action can be taken through:
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Action can be taken through:
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| Trustee |
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Must be an APRA approved licenced trustee. |