Different Types of Superannuation Accounts

Superannuation in Australia is a significant industry. As such, there are many concepts to understand and many regulations to navigate. There are also a huge number of super fund options, and it can be easy to get overwhelmed and confused. In this article, we look into the basics of a superannuation account, the different types of superannuation funds, and their benefits. This way, you’ll get to know your super options better and make informed decisions about your retirement money.

What is a Superannuation Account?

A superannuation account or “super” is a type of long-term savings plan in Australia specifically designed to help you be financially secure in retirement. There are two ways to fund your super account: mandatory contributions by your employer and voluntary contributions made by you. 

Your employer is required by law to make contributions to your super account based on a percentage of your salary. This is called the Super Guarantee. 

Before 2013, the general super guarantee rate was 9% but had been rising incrementally for over a decade. In 2023, the rate is 10.50%, which means that if your monthly salary is $10,000, your employer will pay $1,050 per month on your behalf into your super account. Starting 1st July 2025, the super guarantee rate is set to increase to 12%.

In addition to employer contributions, you can also make voluntary contributions to your account over time. You can choose how much you want to add and how often, and you may be eligible for government co-contributions or tax benefits if you make personal contributions. This way, you can grow your superannuation savings and prepare for a comfortable retirement. You can access your superannuation when you reach preservation age,  which is currently between 55 and 60 years old, depending on your date of birth.

It’s important to note that you can have as many super accounts as you have jobs, and it’s easy to lose track if you change jobs or move. In that case, you can search for your super accounts and have any multiple accounts merged.

Your super is typically managed by a superannuation fund, a type of trust. The money in the trust is used to purchase investments, such as shares, ETFs and bonds, on your behalf and of the other fund members. Superannuation funds are managed by a large variety of institutions. 

But remember, you can choose where your superannuation funds are invested. There are different types of superannuation accounts available, and it would be wise to carefully consider which superannuation account aligns best with your needs, investment goals, investment time frame, and risk tolerance. 

5 Different Types of Superannuation Accounts

You could begin by finding out and understanding what type (or types) of super you have currently and which ones you could explore to potentially grow your super balance even more. Let’s take a look at each of the main types of super accounts or funds:

1. Retail Funds

Retail funds are a type of for-profit super fund marketed directly to the consumer public, unlike corporate, public sector, or industry funds, typically offered through an employer. They are managed by financial institutions such investment managers and are typically managed by your financial adviser. 

Some examples of retail funds are:

• Colonial First State FirstChoice Wholesale Personal Super
• GrowWrap Super
• IOOF Expand Super
• MLC Wrap Super
• MyNorth Super

Retail funds offer a wider range of investment options, allowing you to choose from a variety of assets such as shares, property, and fixed-interest investments. Some offer insurance options, such as life, total and permanent disability, and income protection.

Applying for a retail super fund usually involves transacting directly with the financial institution or a representative of the institution offering the fund. It can be as simple as going to their website, speaking to the representative, or visiting the institution’s branch. You may also establish a retail fund through a financial adviser. 

Apart from features and cost considerations, also consider looking into the fund’s performance over time, the reputation of the institution offering the fund, and the customer support they could provide that can accommodate your unique needs and requirements. 

Retail funds may be one of the easiest that you can get as an individual, as there are so many that are readily available. Because of this ease, it is highly recommended that you take a long pause before jumping to a decision. Also, consider speaking to a financial adviser who can carry out the necessary due diligence and help you determine your best options should you opt for a retail fund.

2. Industry Funds

Industry funds are a type of superannuation fund that were originally established by trade unions and employer associations from a particular industry or sector for the benefit of that industry’s workers. Industry super funds are owned by the members of the fund and are not-for-profit; they are primarily intended to provide a retirement savings plan for its members. 

There are many kinds of industry super funds in Australia. They include:

• AustralianSuper
• REST Industry Super
• Energy Super Fund
• TWUSUPER
• Hostplus
• Construction and Building Unions Superannuation (CBUS)
• UniSuper
• MTAA Super
• Health Industry Plan (HIP)

An industry fund’s investments are managed by a board of directors made up of both employer and employee representatives or trustees, whose aim is to achieve the best outcomes for the fund’s members. 

Any profits made are re-invested into the fund to provide fair and competitive superannuation benefits to members and to promote their long-term financial security. 

Typically, if you belong to a certain industry, such as healthcare, construction, or transport services, your employer might already offer an industry fund as part of their employee benefits. Your company’s human resources department can provide you with information on how to join and contribute.

You may also be able to join an industry super fund as an individual, as many industry funds open up their membership to people outside their industry. 

3. Corporate Funds

If you work in the private sector, your employer might already have their own corporate or employer-sponsored fund set up. They might choose to offer this type of fund as part of your benefits package. Like industry funds, some corporate funds are made available to non-employees.

Examples of corporate superannuation funds are:

• Commonwealth Bank Group Super
• Telstra Super (now open to non-employees)
• Rio Tinto Staff Superannuation Fund 

When you’re enrolled in a corporate fund, your employer’s mandatory contributions will go to this fund on your behalf. Remember, however, that you’re still in control of your corporate super account. You can add to your super through personal contributions or a salary sacrifice arrangement with your employer. You can also choose which investment options you want to invest in, and you can make changes to your account as your circumstances change, such as when you change jobs.

If you’re not sure about how your super account is set up with your current employer, your HR department should be able to provide you with information and walk you through the process. You may also be able to find information about your employer’s corporate super fund on their website or in your employee handbook. 

It is important to note that every employer can have their own specific corporate superannuation fund and may offer different features, investment options, and fees. It’s highly recommended that you review the terms and conditions of your company’s specific corporate super fund to understand the benefits and any potential limitations.

4. Public Sector Funds

Public sector funds, also known as government-sponsored funds, are superannuation funds established for the benefit of employees in the public sector, including government agencies, local councils, and state-owned corporations. 

These funds are designed to provide retirement savings options for public sector employees, and they can offer unique competitive benefits and investment options.

Some examples of public sector super funds in Australia include:

• State Super (NSW)
• UniSuper (higher education and research sector) 
• QSuper (Queensland)
• Public Sector Superannuation Scheme (PSS)
• Uniformed Services Superannuation Scheme (USSS)

If you work in the public sector, you can determine if your employer has a public sector super fund and find out what benefits you have by asking your HR department or checking your employment contract. You may also find more information on your employer’s website or through the fund’s website. 

5. Self-Managed Super Funds 

Self-Managed Super Funds (SMSFs) are a superannuation fund that gives you the do-it-yourself option for managing your retirement savings. As the name suggests, you can set up and manage the fund yourself or with up to five other trustees, ideally with the help of a professional financial adviser and accountant. 

Unlike other types of super funds, an SMSF can offer you complete control and flexibility over your investment decisions and allows you to choose from a wider range of investment options. However, SMSFs may not be suitable for everyone. 

An SMSF typically requires more time, effort, and financial expertise compared to other types of super funds. It also comes with increased responsibilities and regulatory requirements. You would need to have a clear understanding of the rules and regulations set by the Australian Taxation Office (ATO) regarding SMSFs .

Further to this, as you need to pay for the running expenses directly from your SMSF (for example, yearly financials and tax returns) , you need to ensure that you have an adequate balance and cash reserve to fund these costs.

It is important to consider your personal circumstances, financial situation, goals, risk tolerance, and investment experience before deciding if an SMSF is right for you. It would also be a good idea to seek professional advice from a financial adviser and accountant to ensure you make a well-informed choice.

Employer’s Super Fund vs. Employer’s Contributions (Super Guarantee)

To avoid confusion, keep in mind that super funds set up by or made available through an employer are not the same as the mandatory super guarantee contributions made by your employer towards your retirement savings. 

Your employer is required by law to make these regular payments, regardless of which fund you want to hold your retirement savings. Your employer’s super fund is just one of the possible fund options available to you. As an employee, you can choose to have your super contributions paid into the employer’s fund, but you are not required to do so.

Now let’s look into the types of payout benefits that these types of funds can offer.

Accumulation vs. Defined Benefit: What’s the Difference?

Accumulation and defined benefits are two different types of superannuation benefits. The key difference between the two is how the amount of retirement money you will receive is determined. Accumulation benefit is based on the balance of your account and investment returns, while defined benefit is based on a formula that takes into account your salary, years of service, and other factors. Is your retirement payout benefit accumulating or defined benefit? Let’s find out.

Accumulation Benefits

Accumulation benefits, also known as an accumulation fund, is a type of super fund benefit where the amount of money you will receive in retirement is based on the balance of your account. This balance is determined by the contributions made by you and your employer, as well as the fund’s investment performance, less the fees and other charges.

This type of super fund is the most common in Australia and is suited to those who prefer a flexible, low-cost, and simpler option for their retirement savings. Most retail funds, industry funds, and corporate funds offer accumulation benefits.

To apply for accumulation benefit, you would typically need to be employed in a job that offers a superannuation benefit. You would then be automatically enrolled in your employer’s chosen superannuation fund and begin making contributions. In some cases, you may also be able to choose the superannuation fund you would like to enrol in.

Defined Benefits

Defined benefit, on the other hand, is a type of superannuation benefit where the amount you receive in retirement is based on a formula that takes into account factors such as your salary, age, and years of service. 

Unlike accumulation benefit, where the benefit amount you receive can be subject to market volatility, the defined benefit provides a fixed, guaranteed amount of retirement income that is determined in advance. 

It’s worth noting; however, that defined benefit funds are becoming increasingly rare in Australia and are typically only available now to public sector employees or employees of large corporations. Most superannuation funds today operate on an accumulation-benefit basis or a hybrid accumulation-and-defined-benefit scheme such as the Commonwealth Superannuation Scheme (CSS). 

Existing defined benefit funds, such as corporate defined funds QSuper, TelstraSuper, Australia Post Super, and the Federal Government’s Public Sector Superannuation Scheme (PSS), are closed to new memberships. However, if you’re lucky enough to be a member of a defined benefit fund, it can provide a higher level of security for your retirement.

Get Superwise About Your Superannuation with Coastal Advice Group

Superannuation is vital to your financial future in retirement as an Australian. Whatever stage you are right now in your career, learning about how you can make the most out of your long-term retirement savings plan is always a good practice.

There are various types of superannuation funds, including retail funds, industry funds, corporate funds, public sector funds, and self-managed super funds (SMSFs). Each type of fund offers different benefits and features. Superannuation funds can also offer either accumulation benefits or defined benefits, which determine the structure of the contributions and payouts in your super. 

Understanding the different types of superannuation funds and their benefits can help you decide wisely about your long-term retirement savings. As always, it is strongly recommended to seek financial advice and carefully consider your financial situation before making any decision.

At Coastal Advice Group, we can provide the specialist financial planning, expert knowledge and guidance you need to help you make the right financial decisions for your superannuation strategy. We have offices located in Newcastle, the Central Coast, and Port Macquarie. Call us or book online to secure your first appointment with us today and get started!