Superannuation in Australia is big business. Australians hold over 2 Trillion dollars in their combined accounts and there are a myriad of options available to invest in.
Superannuation is simply a structure in which to hold investments. For most employees, your employer makes contributions to an account of your choice, that invests your money to be used in your retirement. You could leave it in the default fund provided by your employer or you could run your own self-managed fund and invest in all types of assets.
It is important to note that there are strict rules about what you can invest in and how and when you can access your money that make this a very complex field which changes constantly. Changes to Superannuation legislation occur regularly, and can stem from Government spending changes, taxation and simply the human condition.
There are a vast number of options available to everyone, and we help you weigh up the benefits and costs associated with each option to help you decide on what is right for you.
Industry super funds are the largest players in the Superannuation industry. Born from agreements between trade unions or large employers they typically have lower account balances and lower options available. This helps them keep costs low and focus on the job of growing people’s retirement savings as they see fit. The good majority of the Australian population does not actively engage in management of their superannuation until they are close to retirement and industry super fits their needs well.
This is the true competitive market. Retail super funds are used by a smaller percentage of the Australian population but are typically used by people with higher account balances. Though fees are on average marginally higher, they tend to provide a much greater level of control and transparency to their investors. Often run by banks and private equity firms they are subject to significant oversight which makes reporting and accountability key. Financial Planners tend to favour this space as it provides them with the tools they need to help clients understand and manage their Superannuation funds with the guidance of a professional adviser.
You are the boss! Though there are still rules and regulations to self-managed superannuation funds (SMSF’s) the investment options that you can invest in are significantly increased. Classic cars, rental properties or even a wall mounted moose head could potentially be owned by your SMSF. The key factor here is that by having few limits on what you can invest in, there is a much greater potential to make errors and breach a regulation you were unaware of. It is for this reason that your SMSF needs to be independently audited each year, which has significant cost. In our experience, the attraction of having control often leads people to establish a fund that invests in the same assets as could easily have been achieved using a retail or industry fund. Another common pitfall is lack of diversification leading to poor returns. This is a complex option and while rewards can be high, you need to go into this VERY well informed.
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