We have all seen the ‘Compare The Pair’ ad on television - an interesting, simple and effective ad. The ad served its purpose - it aroused my curiosity…I did some quick research to find out how and why these funds perform better than the normal retail super funds.

What Are Industry Super Funds

These funds have the origins in the trade unioins. But today they have diversified and tend to serve a much broader market. The funds are either for employees in a particular industry or group of industries. They are governed by an independent trustee.

There are two types of industry super funds:

* Public Funds: These offer membership to anyone working in any occupation. Most of the funds I researched seem to belong to this category.

* Private/Restricted Funds: These as the name suggests restrict their membership to employees in the industries they are affiliated to.

So How Come They Have Better Returns

Well the answer to this question lies in the dreaded four letter word - ‘Fees’. These funds have much lower fees when compared to the traditional retail super funds. They also pay no commissions to financial advisers. The retail super funds on the other hand offer commissions and these commissions add up to the fees the fund members have to pay.

In early 2008 Rainmaker (a data company) released some interesting results from an extensive research it did on super funds - Over a five year period for every dollar in fees paid by someone in a retail master trust, the fund made $8.90 in profit.
Over the same period for every dollar in fees paid by someone in a industry super funds, the fund made $16.80 in profit.

So that’s double the profit for every dollar spent in fees. Remarkable !!!!

The Dreaded Entry And Exit Fees

Most of these funds (almost all of them all) have no entry or exit fees. They only have one fee called a ‘member fee’. Some industry funds charge a small administration fee in addition to the member fee. I remember when I switched over my funds a couple of years ago (from one retail super to another retail super fund), I lost a huge chunk in entry and exit fees.

Beware Of The Financial Planners

Not all financial planners recommend industry super funds because they gain nothing by recommending them - No commissions are offered. And so a lot of financial planners (both big and small) have removed industry super funds from their lists.

Where Can You Get More Information

Here are two good resources - Industry Super and Association Of Superannuation. Ring around and research more before you make any decision.

Have you got your funds in an industry super fund? Or are you planning to move? I would be interested in finding out more from you.

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