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Superannuation: Driving a super bargain

Every Issue

Cite as: (2003) 77(10) LIJ, p.92

When purchasing super, you need to decide if you are a Rolls Royce or Holden buyer.

An array of super vehicles exist in the marketplace. They range from Rolls Royce fund to a Holden and while both will take you along the road to retirement, you need to decide which will best equip you for when you stop working.

Often employers choose the super vehicle for their employees. The federal government has been attempting for some time, without success to date, to introduce employee fund choice. However, whether or not individual fund member choice is available, all of us need to understand the current options.

The Rolls Royce provides an extravagant and perhaps indulgent range of options to comfort you along the road to retirement with a large up-front investment and increased operating costs. The Holden delivers the minimum level of options within the budgets of most people, and for way less than the Rolls Royce purchase cost.

You will want to be comfortable on the drive to retirement, but you also need to ensure that your vehicle suits your needs once you have retired.

In the superannuation industry it could be said that retail funds are the Rolls Royce end of the market, while industry funds are the Holden end.

Retail funds have an extensive range of options with costs to match. Industry funds, such as the Legal Industry Superannuation Scheme (LISS), tend to have a less extensive but competitive range of options at reduced cost. As always, more options come at a cost – do you want to pay extra for the Rolls Royce options or will the less expensive and expansive options of a Holden be best for you?

Some key philosophical difference exist between retail and industry funds. Retail funds are expected to generate dividends for their shareholders, while most industry funds do not return dividends to shareholders, instead returning surplus revenue to members. Industry funds operate across Australia and held $52 billion in assets at March 2003. They are operated by trustee boards with equal board representation of members and employers. In this way they are a partnership between members and employers.

To determine whether you are a Rolls Royce or Holden buyer, you need to look at the options and select the vehicle that provides the combination of options that suits your needs.

The following table gives the points of comparison between industry and retail funds:[1]

Industry fund $52
Retail fund (1) $180
Saving with an industry fund $128

Administration costs
Industry fund $220
Retail fund $761
Saving with an industry fund $541

Total saving on insurance and administration costs for one year is $669, while over a 30-year working life it is $20,070.

In the event of death or disablement, insurance may provide an insured lump sum on top of your super account balance.

Industry Fund Services’ research also showed that industry funds delivered returns in excess of 4 per cent greater than the performance of the retail funds across 2002 and 2003.

Interest rates for eight leading retail funds and 11 industry funds follow:[2]

1 year return to 30 June 2003
Retail funds Negative 1.5 per cent
Industry funds Plus 2.5 per cent
Difference Negative 4.0 per cent

1 year return to 30 June 2002
Retail funds Negative 4.9 per cent
Industry funds Negative 0.2 per cent
Difference Negative 4.7 per cent

The comparison of superannuation vehicles for individual purposes needs to be considered in the context of individual retirement goals and objectives. The information in this article cannot in the space available attempt to be all-inclusive and is intended solely to broadly introduce some of the key differences between industry and retail funds. In terms of investment performance it should be noted that past performance is no indicator of future performance.

Therefore, if you are a Rolls Royce driver and want to trade in your vehicle for a Holden, employers and members should ask questions about their current super vehicle, including querying its administration costs, insurance options, and investment performance.

How does your fund compare to the above information?

ANDREW PROEBSTL is the Law Institute superannuation general manger, Legal Industry Superannuation Scheme (LISS) fund secretary and a member of the Victorian Executive of ASFA. He can be contacted on phone 9607 9401, email or visit

[1] Source: Results of research by Industry Fund Services (examined by PricewaterhouseCoopers and published in the Weekend Australian Financial Review, 16-17 August 2003) of 8 leading retail funds and 11 industry funds.

[2] Note 1 above.


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