Prior to 1983, only 39 per cent of the working population (and 25 per cent of women and 'blue collar' employees) had superannuation. Most superannuation schemes at that time were not portable, meaning employees could not take their super fund with them if they changed jobs. And they had strict vesting rules, so employees often lost any superannuation benefits they accrued if they left their employer. Most employer super arrangements were generally available only to public servants or senior management in the private sector.
Industry super funds began to emerge in the 1980s following campaigns led by the Australian Council of Trade Unions (ACTU). In 1992, compulsory super (the superannuation guarantee) was introduced, requiring all employers to make mandatory contributions for their employees. This extended coverage significantly, especially amongst those groups of workers who had previously missed out on superannuation benefits.
Union and employer organisations had an interest in ensuring that these superannuation monies were protected from the high fee and commission products which then typified the retail market. This led to the establishment of industry super funds.
Over the past 25 years industry super funds have developed into sophisticated, competitive providers of retirement income products. Industry super funds have a unique structure:
- They are ‘run only to benefit members’
- They are governed by trustee boards specifically representing employees and employers – typically these trustees are appointed by both the ACTU and/or unions and employer associations. A two-thirds majority is necessary for all decisions
- They have, on average, lower fees than retail super funds*
- They do not pay sales commissions to financial planners
- They have adopted innovative investment strategies.
These differentiating factors have contributed to the outstanding performance of industry super funds over the long term, a fact that is consistently reported by superannuation industry ratings agencies.
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*Based on a sample of 16 Industry SuperFunds and a sample of 16 retail super funds as at 30 September 2011 (source - Research by SuperRatings, commissioned by Industry Super Network, a division of Industry Fund Services Pty Ltd ACN 007 016 195, AFSL 232514)