Also known as Account Based funds, these are the most common type of superannuation funds and include personal superannuation funds and Retirement Savings Accounts (RSA). In an accumulation fund the end benefit is the return of contributions plus investment earnings less fees, charges, tax and insurance premiums. They are relatively simple to understand with the member usually able to determine the value of the benefit at any given time. However, the member bears all investment risk.
Also known as non-account based funds are open only to employees of the provider. To date most public sector funds and some corporate superannuation funds have been defined benefit schemes. As governments and large companies seek to limit their future liabilities, defined benefit funds are becoming less common. With a defined benefit fund, the end benefit is determined by set criteria. The criteria usually take into account such variables as length of service, member contributions and salary level on retirement. These schemes can be quite complex to understand and the member bears little, if any, investment risk. Investment risk is carried by the employer or the fund.
Employer contributions made for eligible employees who do not nominate a chosen superannuation fund are required to be contributed to an authorised ‘MySuper’ fund. MySuper funds are ‘default’ funds for employer benefits to be paid where the member has not or does not wish to choose a super fund.
MySuper funds are accumulation funds that offer a lower fee base while offering specified basic features. This is to avoid paying for services that may not be needed. MySuper funds may also offer investment options designed for life stages. For more information on MySuper funds visit the Australian Prudential Regulation Authority (APRA) website at www.apra.gov.au and the Australian Taxation Office (ATO) website at www.ato.gov.au.
Superannuation funds or schemes are offered by a wide range of private and Government institutions, namely:
- public sector employers;
- private companies for their own employees;
- industry funds established under an industrial award or agreement (most are now public offer funds);
- banks and other financial institutions may offer RSA;
- life insurance companies (public offer);
- friendly societies (public offer);
- independent fund managers (public offer); and
- Self Managed Super Funds (SMSF).
The following table outlines the types of super funds available in Australia and some of the basic features they offer.
|Types of Funds||Features|
Public Offer Funds
(including retail funds)
|Personal Superannuation Funds||
|Retirement Savings Accounts||
|Non-Public Offer Funds||
|Company Based Funds||
|Public Sector Funds||
|Self Managed Super Funds (SMSF)||
|Small APRA Funds (SAF)||