Retirement
What is the difference between a super fund and an SMSF
Employed individuals are eligible for superannuation, but not everyone is satisfied with the selection of investments with pre-made supers. Individuals are allowed to set up a self-managed super fund (SMSF) in lieu of professionally managed supers.
Here is a comparison between a professionally managed super fund and an SMSF:
Professionally managed super fund vs SMSF
Professionally managed super fund |
SMSF |
|
Power in managing the fund |
It managed by professional fund management companies. Since the majority of employers and employees choose this option, there is no limit on the number of members. All the work and portfolio management are handled by professionals and contributors only need to keep track of their accounts. |
SMSF has a four-member limit. All members serve as trustees and co-manage the SMSF. Trustees must ensure that the fund complies with all super and tax laws. Each member will be held liable and fined if there are any breaches committed. |
Control of the investment strategy |
Professionally managed super funds have the tendency to offer a safe set of balanced investment funds for contributors. Although most of the choices are diversified, balanced and safe, the possibility of chasing high yield when opportunities arise is low. Most pre-selected super funds, moreover, are designed for maximum safety while earning continuously for its members, who are usually low and average-risk investors. |
SMSF is a good choice for contributors who want more choices on where their money gets invested. SMSF is the better choice for moderately aggressive and aggressive risk-takers who prefer a personalised approach to invest rather than staying safely in the sidelines with low to average, though steady, rewards. |
Responsibility for compliance |
Most professionally managed supers are managed by professional fund managers. Although contributors can just sit back and relax while experts work on growing their retirement money, employees should keep track of their super accounts to get the most out of their retirement investment(s). Employees may pay huge fines for breaching the law if they exceed the contribution cap. |
SMSF trustees ‘paddle their own rafts’ even when they pay professionals to keep track of their fund’s legalities. SMSF members should be knowledgeable about super regulations and tax laws to ensure legal compliance and avoid breaching existing regulations. The responsibility of compliance lies solely on the trustees, and not on professional managers. |
Access to safety nets |
Professionally managed super funds usually come with insurance to assure clients that they have a safety net in case anything bad happens. | SMSF members may or may not have an insurance policy to protect their funds. The decision to ensure their fund rests upon the trustees’ agreement. |
Regulatory body |
Fund members are assured that the superannuation Complaints Tribunal will be able to resolve issues, and can even reward them with statutory compensation or government financial assistance for their troubles. |
In the case of any dispute, internal or otherwise, SMSF trustees are on their own. In addition, the trustees are not eligible for any financial assistance from the government in cases of theft or investment fraud. |
Professionally managed super fund vs SMSF: Which one to choose
Both types of super funds have their merits so generalising that one is better than the other is ill-advised. Contributors should take their time and skills into consideration before making a decision for their super.
To guarantee that you end up with the superannuation set up that suits perfectly with your objectives, risk tolerance, and time, make sure that you understand everything you need to know about professionally managed super funds and SMSFs. As mentioned in the table above, both of them have their own sets of features that may attract a certain group of people.
For most Australians, choosing a professionally managed super fund, such as MySuper, is their default choice. All money invested in these super funds is managed by experienced fund managers. Fund members generally do not have any responsibility in developing the investment strategy for their super funds, giving them limited to no control of when o buy and sell investments.
But for Australians who aim for greater control over where their super money goes, choosing to set up SMSF sounds more attractive to them. It gives them the capability to control how their wealth and investment strategies shall work, allowing SMSF members to set up an approach that suits ideally with their current state of life. This allow SMSF members to potentially obtain higher returns.
Ultimately, what structure to choose will depend on your individual circumstance. If you want greater control over your investments, then set up SMSF. But if you are more comfortable relying on the expertise of seasoned fund managers, then go for an industry fund. You can also seek professional advice to better understand your circumstances and have better knowledge on which superannuation trust structure to choose.
What is the difference between a super fund and an SMSF
Employed individuals are eligible for superannuation, but not everyone is satisfied with the selection of investments with pre-made supers. Individuals are allowed to set up a self-managed super fund (SMSF) in lieu of professionally managed supers.
Here is a comparison between a professionally managed super fund and an SMSF:
Professionally managed super fund vs SMSF
Professionally managed super fund |
SMSF |
|
Power in managing the fund |
It managed by professional fund management companies. Since the majority of employers and employees choose this option, there is no limit on the number of members. All the work and portfolio management are handled by professionals and contributors only need to keep track of their accounts. |
SMSF has a four-member limit. All members serve as trustees and co-manage the SMSF. Trustees must ensure that the fund complies with all super and tax laws. Each member will be held liable and fined if there are any breaches committed. |
Control of the investment strategy |
Professionally managed super funds have the tendency to offer a safe set of balanced investment funds for contributors. Although most of the choices are diversified, balanced and safe, the possibility of chasing high yield when opportunities arise is low. Most pre-selected super funds, moreover, are designed for maximum safety while earning continuously for its members, who are usually low and average-risk investors. |
SMSF is a good choice for contributors who want more choices on where their money gets invested. SMSF is the better choice for moderately aggressive and aggressive risk-takers who prefer a personalised approach to invest rather than staying safely in the sidelines with low to average, though steady, rewards. |
Responsibility for compliance |
Most professionally managed supers are managed by professional fund managers. Although contributors can just sit back and relax while experts work on growing their retirement money, employees should keep track of their super accounts to get the most out of their retirement investment(s). Employees may pay huge fines for breaching the law if they exceed the contribution cap. |
SMSF trustees ‘paddle their own rafts’ even when they pay professionals to keep track of their fund’s legalities. SMSF members should be knowledgeable about super regulations and tax laws to ensure legal compliance and avoid breaching existing regulations. The responsibility of compliance lies solely on the trustees, and not on professional managers. |
Access to safety nets |
Professionally managed super funds usually come with insurance to assure clients that they have a safety net in case anything bad happens. | SMSF members may or may not have an insurance policy to protect their funds. The decision to ensure their fund rests upon the trustees’ agreement. |
Regulatory body |
Fund members are assured that the superannuation Complaints Tribunal will be able to resolve issues, and can even reward them with statutory compensation or government financial assistance for their troubles. |
In the case of any dispute, internal or otherwise, SMSF trustees are on their own. In addition, the trustees are not eligible for any financial assistance from the government in cases of theft or investment fraud. |
Professionally managed super fund vs SMSF: Which one to choose
Both types of super funds have their merits so generalising that one is better than the other is ill-advised. Contributors should take their time and skills into consideration before making a decision for their super.
To guarantee that you end up with the superannuation set up that suits perfectly with your objectives, risk tolerance, and time, make sure that you understand everything you need to know about professionally managed super funds and SMSFs. As mentioned in the table above, both of them have their own sets of features that may attract a certain group of people.
For most Australians, choosing a professionally managed super fund, such as MySuper, is their default choice. All money invested in these super funds is managed by experienced fund managers. Fund members generally do not have any responsibility in developing the investment strategy for their super funds, giving them limited to no control of when o buy and sell investments.
But for Australians who aim for greater control over where their super money goes, choosing to set up SMSF sounds more attractive to them. It gives them the capability to control how their wealth and investment strategies shall work, allowing SMSF members to set up an approach that suits ideally with their current state of life. This allow SMSF members to potentially obtain higher returns.
Ultimately, what structure to choose will depend on your individual circumstance. If you want greater control over your investments, then set up SMSF. But if you are more comfortable relying on the expertise of seasoned fund managers, then go for an industry fund. You can also seek professional advice to better understand your circumstances and have better knowledge on which superannuation trust structure to choose.
RELATED ARTICLES
About the author
About the author
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more
Superannuation
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into ...Read more
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more
Superannuation
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into ...Read more
