There are various types of superannuation fund offered by different organisations with union, employer or government involvement. Terms and conditions vary, and fees, charges and benefit structures differ.

Industry funds

Industry funds arose out of occupational award superannuation from the mid-1980s. Most awards specified that contributions were to be paid to employer-sponsored funds or nominated industry funds. Industry funds were created under arrangements between unions and industry associations. Some industry funds have also become public offer funds; that is, membership is open to people outside the industry where they originated.

Board structure

Industry funds have equal member and employer representation on their trustee boards.

Member representatives are usually drawn from relevant unions or elected from among members. Employer representatives are usually drawn from relevant industry associations or among participating employers.

Fund type

Industry funds are invariably accumulated contributions funds with:

Most now offer members investment choices that can be altered periodically.

Major industry funds

Most industry funds have earned reasonable investment returns for their membership over the years. As a result, many have become very large, with hundreds of thousands of members and growing asset bases. These include:

What they offer

The size of industry funds has provided economies of scale in administration and investment and in insurance benefits offered.

Some funds also offer other fringe benefits, such as discounted home loans, health insurance and financial advice.

Corporate funds

Employer-sponsored corporate superannuation funds have traditionally been generous defined benefit funds, with compulsory member contributions and death and disability benefits often calculated in the same way as full retirement benefits.

Fees, charges and insurance benefits are often subsidised by the sponsoring employer or through fund surpluses.

Changes to corporate funds

The vesting rules of traditional employer-sponsored funds, which limit benefits for early retirees, have gradually disappeared from corporate superannuation funds, and there has been a shift towards accumulated contributions funds or the outsourcing of fund management as prudential requirements and taxation rules have become more and more complex.

Public sector funds

Commonwealth

The federal government set up statutory superannuation funds for its public servants in the early 20th century.

Fund type

Commonwealth superannuation funds, such as the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme and the Military Superannuation and Benefits Scheme, are generous defined benefit funds with compulsory member contributions and pensions or lump-sum benefits based on:

Additional benefits

The schemes provide generous death and invalidity benefits, although under the Military Superannuation and Benefits Scheme, the rate of an invalidity pension depends upon the classification of the seriousness of the invalidity.

Dispute resolution

The dispute resolution mechanisms for federal public sector funds are the same as for private regulated funds, with internal complaints to the funds and external complaints to the Superannuation Complaints Tribunal ( see Dispute resolution).

However, generally there is no right of action in the civil courts in relation to a decision of most Commonwealth superannuation schemes, except for the Australian Government Employees Superannuation Trust.

The Australian Government Employees Superannuation Trust

Many non-permanent federal government employees are members of an accumulated contributions fund, the Australian Government Employees Superannuation Trust, which pays accumulated contributions and interest on termination and also includes death and total and permanent disability lump sum insurance cover. It may also be possible to obtain salary continuance insurance cover.

New South Wales

Various branches of the NSW state public service have been covered by superannuation schemes for many years. These include the State Superannuation Scheme, the State Authorities Superannuation Scheme, the Public Sector Executive Superannuation Scheme and the Police Superannuation Scheme.

First State Super

After the introduction of compulsory employment- based superannuation in 1992, the state government set up an accumulated contributions fund called First State Super. It is now one of Australia’s largest superannuation funds, with over 300,000 members. It covers most new NSW state public servants as well as those transferring from other state schemes.

First State Super offers:

Regulation

The NSW state superannuation schemes are not regulated under the federal regime, although the NSW government has signed an agreement with the federal government to protect members’ accrued benefits and to conform with the principles of the federal government’s retirement incomes policy.

Dispute resolution

The NSW state superannuation dispute resolution system is different from that for private sector regulated funds.

A complaint against the decision or conduct of a scheme can be lodged with that scheme. A member who is still dissatisfied can appeal to the NSW Industrial Relations Commission within six months of being notified of a determination, or longer if the commission allows. The commission has the power to overturn the decisions of NSW state superannuation schemes.

Generally, there is no right of action to the civil courts in relation to decisions of the NSW state superannuation schemes.

Master trusts

Master trust superannuation funds are offered to the public by:

They have single corporate trustees and trust deed that allow many individuals and companies to participate, although employers often have their own sub-plans to a master trust.

How they work

Master trusts pool accounts for investment, with returns (or losses) credited to (or deducted from) members’ accounts after the deduction of fees, charges and taxes.

Other benefits

Many master trusts offer death, total and permanent disability and salary continuance benefits, often provided by related life insurance companies.

Regulation

Master trusts are regulated superannuation funds and are subject to the federal prudential requirements, including preservation, member protection and dispute resolution standards.

Retirement savings accounts

Retirement savings accounts commenced in 1997 as an initiative of the federal coalition government. Mainly offered by banks, they provide a simplified superannuation product without the complicated trusts structures of private regulated superannuation funds.

Retirement savings accounts must be capital guaranteed, and each account is credited with a set percentage of interest each year.

They are low-risk products with low rates of return, and many have low levels of fees and charges. They may also include death and disability insurance benefits.

Purpose

Retirement savings accounts are designed to be short-term investments for people in casual or short-term employment.

An account provider is required to notify account holders of alternative products once their account balances have reached $10,000.

Regulation

Retirement savings accounts are subject to the same preservation, member protection and dispute resolution rules as other regulated superannuation funds.

Self-managed funds

Self-managed or do-it-yourself (DIY) funds must:

They have a different prudential regime from regulated funds in relation to such matters as reporting, investment and dispute resolution. Their popularity has increased in recent years.

Roll-over funds

Roll-over funds were set up in the early 1980s to accept superannuation benefits from people changing jobs or retiring early.

Examples are:

Roll-over funds do not include disability or death insurance benefits, but they are regulated funds and they are bound by prudential requirements similar to those of other regulated funds.

Choice of fund

Under the compulsory superannuation regime, an employer is required to pay contributions into a regulated superannuation fund for the benefit of employees.

The choice of fund is a matter for the employer, subject to:

Most awards nominate a relevant industry fund as the fund of choice.

Can employees choose?

Employers are often not prepared to offer a choice of funds for administrative reasons, although there is a trend towards broader choice being offered to employees.

There have been proposals to widen the choice of funds available to members outside the award system.

The federal coalition government has attempted to legislate to mandate the choice of funds in occupational superannuation, but as at 2003 the senate has not passed the proposed legislation.