Historically, industry funds were created by industry bodies and trade unions as superannuation products designed for their employees and only made available to them.

These days, these funds are made available to anyone and are also referred to as public offer funds.

Generally, investments held in an industry fund are “pooled”, meaning you would buy a unit in a large pool of investments which you share with other members. This can have disadvantages, such as not owning your own cash account inside your super portfolio.

Industry funds are not-for-profit, which in theory would mean lower fees. However, fees still range from low to high in industry funds.

Whilst fees are generally lower, investment selection is generally more limited.

A retail fund, unlike an industry fund, is owned by shareholders and run for a profit. They are also available to anyone in the public. Whilst generally more expensive than retail funds for the average member, groups with scale can negotiate lower fees for their clients. Retail funds generally have a larger range of investment options and can be categorised as either a wrap account or a master trust.

Wrap accounts generally have a larger range of investment options, including access to direct listed investments (CBA, BHP, etc). In a wrap account, you hold beneficial ownership in each underlying asset you hold, whereas in a Master Trust account, you hold units in a “pooled” fund with other members. This means that in a wrap account fees and taxes (payable and refundable via franking credits) are reported and deducted from your unique bank account inside your portfolio. Whereas in a Master Trust, fees and taxes (both payable and refundable via franking credits) are included in the calculation of the unit price of the fund that you hold units in. Benefits of holding underlying ownership in each asset (e.g. in a wrap account) include the ability to transfer assets to another investment platform directly (including transferring from the accumulation phase to a pension phase without incurring sales), participate in corporate actions, and buy/sell select investments in your portfolio. Holding a unique bank account allows you to budget cash flow specifically to meet pension requirements or to hold a certain amount of cash for an anticipated future purchase such as a car or holiday.

Similarities:

Both structures allow access to wholesale funds due to the ability to bundle up all funds across all investors in the product. This allows investors to qualify for the high levels of minimum investment required to access wholesale investments.

Different products may be appropriate for individuals with different situations, goals, reporting preferences and investment preferences.

SMSFs can be appropriate for investors who wish to hold direct property, crypto-currency or illiquid investments such as private equity inside Super

Wrap accounts can be appropriate for investors who prefer control and a large range of selection of their investments, but do not require investments such as direct property, cryptocurrency and/or illiquid investments.

Industry funds and master trusts can be appropriate for investors whose main objective is to minimise cost and do not require a large range of investment options, do not want to in-specie transfer investments, participate in corporate actions, and control their own cash account

It’s very important to plan out superannuation. Without proper planning, people risk going into retirement without enough money to meet their desired cost of living. They also risk running out of time to contribute due to annual caps applying with age restrictions. This could force them to hold their assets outside of superannuation where additional taxes may apply. Not having enough money could also force people to go back into the workforce and find other ways to achieve financial security. With superannuation planning, it will be easier for a person to look forward into the future and choose an investment strategy that may achieve their retirement goals commensurate with the level of risk they are willing to accept to fund their future living costs.

Superannuation planning can help a person determine the ideal return rate on their investments, the risk levels that they should take to achieve their goals, and the number of money people can withdraw from their investment portfolio at a given time.

The amount of money a person should have in their super depends on a number of factors. These include but are not limited to: how much investment risk you are willing to accept, how much money you would like to live off, whether you would prefer to run down your capital to zero or if you have a specific goal of leaving a certain level of inheritance. Starting to contribute early can have large impacts on your final retirement balance due to the effects of investment returns compounding in a low tax environment.

According to the Superannuation Funds of Australia’s report in March 2022, individuals looking to retire at around 67 years old with their own home would need at least $46,494 annually to sustain their lifestyle if they were to retire today. The amount required to achieve this spending goal would differ based on whether you are happy to allow your capital to decline in nominal terms, whether you are happy for it to decline in real terms (e.g. adjusted for inflation), whether you want to set aside an amount as a provision for a contribution in to an Aged Care facility, whether you would like to factor in the Age Pension, etc.

SMSF stands for “Self-Managed Superannuation Fund”. A common misconception about SMSFs is that you need SMSF to manage your investments yourself. This is not true. There are many other types of superannuation structures such as wrap products that allow you to manage your own investments. One of the main assets an SMSF allows you to invest in is a direct property. There is also the freedom to hold investments that are not approved by the superannuation trustee that would otherwise be administering your fund, which may include funds with lower liquidity or unlisted investments.

However, being your own trustee also comes with drawbacks, such as the responsibility falling on yourself for adhering to the SIS Act and paying for the preparation of financial statements and the lodgement of an annual tax return.