When it comes to the kinds of fees you may be charged by your super fund, the type of fund it is plays an important role. So, it's important to understand the different types of funds there are, and why they charge the fees that they do.
The five main types of super funds in Australia are as follows:
- Retail super funds
- Industry super funds
- Corporate (or company) funds
- Public sector super funds
- Self-managed super funds (SMSFs)
The fees charged by each of these funds can vary greatly, with some funds charging no fees under certain categories.
Industry super funds, for example, don’t pay commissions to brokers, which other funds (such as corporate funds) charge as indirect costs/fees associated with the management of your account.
In general, industry super funds charge their members low fees compared to other funds, due to being not-for-profit mutual funds. This means that their profits are returned to members rather than shareholders.
In contrast, retail super funds - which are typically run by banks or investment companies - aim to keep some of the profit they make and distribute it to shareholders. They can come at a higher cost than other funds, but many offer a lower cost MySuper option.
Public sector funds also offer members lower fees, although these funds are often restricted to state and federal government employees.
SMSFs may offer the most flexibility when it comes to fees, as you choose the investments, insurance, and manage it yourself. But keep in mind, SMSFs do tend to come with a lot more work and often a higher level of risk.