The Law Handbook 2024

412 Section 5: Managing your money effectively provides the administration for the fund. Increasingly, employers are turning over such funds to professional administrators that charge commercial fees for administration. These are usually referred to as ‘company schemes’. In other cases, the employer chooses a ‘master trust’ arrangement, in which a large financial organisation (e.g. a life insurance company) sets up a commercial fund that can service many employers. Often, the fund is invested with the associated life insurer or the associated funds manager. Employees of the Commonwealth Government have their superannuationpaid into theCommonwealth Superannuation Scheme, the Public Sector Super­ annuation Scheme or the PSS Accumulation Plan. Employees of state government instrumentalities have their own superannuation schemes. These have been much amalgamated and, in some cases, have had benefits reduced in recent years. There is still a variety of schemes and benefits, such as the Emergency Services and State Superannuation Scheme and Aware (previously VicSuper). Some of these schemes are controlled by an Act of Parliament and administered by a board. Appeals of decisions of such boards can be taken to the Victorian Civil and Administrative Tribunal. Other schemes are controlled by a trust deed and a trustee. There are also superannuation schemes available to individuals outside the employment context. Most large financial institutions provide a master fund type scheme in which the individual makes contributions to provide for their retirement to a commercial trustee who invests the funds. Banks and other institutions also provide retirement savings accounts that have the same function, although they seem to produce lower returns than others. Individuals (usually self-employed people) can also set up private superannuation funds (the so-called DIY or self-managed super funds). In such a fund, each member has to be involved in the management of the fund, and there are strict limits on what can be done with the money. Such funds are not economically feasible if the amount of funds is less than about $250000. Features of superannuation funds Usually, defined benefit schemes are much more generous than accumulation type schemes. Therefore, a person in a defined benefit scheme will usually be better off staying in such a scheme than shifting to any type of accumulation scheme. If a person is already in an accumulation type fund, then there are probably four main things to consider before either deciding to stay in the current fund or shift to a new fund. 1 Fund’s performance: The first thing to consider is the fund’s investment performance. The main job of a superannuation trustee is to invest your money to generate strong, consistent returns. Do not judge a fund only on its performance in the past year; look at the trustee’s investment performance over the past 5–10 years. Take into account that a variety of investment options is usually available to fund members. For example, there may be a conservative (capital stable) option, a balanced option and a growth option, depending on the member’s appetite for risk. So, it is worthwhile looking at the investment performance of the trustee in respect of each available option. In addition, some funds take into account ethical and environmental considerations in their investment decision-making. You should consider how you want your money invested by the super fund. If you do not make a choice, you will be placed in the default investment option, which is usually a balanced investment option. NOTE: SUPER COMPARISON TOOL The ATO’s YourSuper comparison tool compares 80 MySuper products by fees and net returns (see www.ato.gov.au/Calculators-and-tools/YourSuper- comparison-tool/ ). 2 Fees and charges: The second thing to consider is the trustee’s fees and charges. An average superannuation fund charges about 1.3 per cent (of the funds under management) for investing and administering the fund. Some public sector funds charge less than 0.5 per cent. Some funds charge three per cent. Because ‘industry’ funds and public sector funds are not-for-profit, the fees charged by these funds should be lower than the fees charged by the funds run for profit. 3 Insurance benefits: The third thing to consider is the insurance benefits available. Death, disability and sometimes income protection benefits are some of the most significant benefits available in superannuation. It is generally cheaper to buy