Superannuation 09/10/2020

Corporate Super Funds: A Beginners Guide

Don’t have enough time to manage funds for retirement? A corporate fund is usually organised by your employer with a board of trustees. The employees and employer can select the board of trustees. Big industry or retail funds can also manage their own corporate super funds.

How does a corporate super fund work?

You will have the flexibility to pick and change your investment strategy in a corporate super fund. This depends on your circumstances. Be careful in choosing where to set or switch your funds. Take into consideration the level of risk, projected investment returns, and time frame.

Here are the most common features of a corporate super fund:

  • All of the profits go back to you if the employer or industry super fund manages the investment.
  • You have a wide range of investment options to choose from depending on your circumstances.
  • The fees charged are usually low to medium. Some small employers can charge higher fees.
  • Most of the corporate funds are accumulation funds.

Your funds will be placed in a default investment strategy until you finalise your choice.

Did your employer arrange your super account as part of your employee benefits? It is highly likely that you are a member of a corporate super plan.

Did you keep the corporate super account after resigning from the company? The account may be transitioned to the retained member division or personal division. Sometimes they remove the benefits that come with the company such as automatic insurance and lower fees.

Advantages and Disadvantages of a Corporate Super Fund

Check if the pros outweigh the cons of the super fund based on your situation.

Advantages

  • You get to enjoy many options and flexibility.

The available selection of investment funds covers all big asset classes. You have access to various types of asset and assets combinations.

  • Different membership types are available.

You can pick between accumulation funds, defined benefit fund, or a combination of the two.

  • You can get rollover assistance

They offer assistance if you decide to transfer your previous super funds to a corporate super fund.

  • Lower costs

The ongoing charges for your superannuation account may be lower if you belong to a big company. Your employer may be able to ask for better terms because of the huge amount of funds invested. Smaller companies may have more expensive charges.

  • Automatic Acceptance Limits

You may get what is known as Automatic Acceptance Limits in a corporate super fund. This means that any insurance cover up to a specific level is released automatically. This no longer requires medical underwriting.

Disadvantages

  • Fluctuating value

The value of investment funds tends to rise and fall.

  • Returns

The returns are not guaranteed, just like in any other investment.

  • Overseas Risk

Currency conversion may be involved if the fund is invested overseas.

  • The ability of the investment to fit your needs

The balance in the super fund (including returns and contributions) may not cover all of your financial needs.

  • Changes in circumstances

Changes in the political and economic climate, as well as legislation, may affect investment performance. This includes taxation and super laws.

Things to Consider in Choosing Corporate Super Funds

You have many options for investment so you must know what to look for. Here are the top things to consider:

  • Performance – check the returns over a 5- to 10-year timeframe
  • Fees – don’t turn away from higher fees if it has a good historical performance
  • Choices for investment – Go for a fund that matches your risk profile

Review the Product Disclosure Performance (PDS) carefully to give you information on the fund’s benefits, level of risk, fees, and charges. If the fund is not right for you, a comparison website like Makes Cents will surely help you see all other available options. Use our comparison tool today!