Pros, Cons & Key Differences

Considering managing your super yourself? Here’s what you need to know about how SMSFs compare to other common types of super funds. 

Superannuation is a cornerstone of Australia’s retirement system, and while employers have no choice but to pay it, Australians have plenty of options when it comes to managing it.

Industry super funds are the most popular, accounting for 60% of all funds, according to KPMG’s Super Insights 2025 report. Trailing industry super funds in popularity are Self-Managed Super Funds (SMSFs), making up 26% of all funds. Less popular again are retail super funds, public sector super funds, and corporate super funds.

The main difference between an industry fund and an SMSF is who manages it. An industry super fund is a large-scale managed fund that pools investors’ (everyday Australians’) retirement savings to (ideally) make a decent return. An SMSF is managed by a trustee – which may just be one person – in order to create returns using a smaller amount of money, typically with a targeted strategy.

Here’s what you need to know if you’re considering changing the way your retirement savings are invested.

What is an industry super fund?

An industry super fund is a not-for-profit organisation that benefits the members – meaning the fund’s profits are distributed among members and largely reinvested.

Employers might provide you with options to join a super fund affiliated with your industry, but you are in no way obligated to join the fund most relevant to your job. On the other hand, if you change industries you can keep your super in your existing industry fund.

What about retail super funds?

It’s also worth mentioning retail super funds. They work similarly to industry funds, except for the not-for-profit part. Retail funds are offered by investment companies and banks.

While they typically offer a wider range of investment options, they also come with higher fees, some of which aren’t reinvested into the fund.

What is an SMSF?

An SMSF is a private super fund, managed by up to six members (trustees).

They’re in charge of everything from choosing and overseeing the fund’s investment strategy, to ensuring the fund operates within super laws and is adequately audited. Though, they can delegate many tasks to professionals if they choose.

SMSFs can also run under a corporate trustee structure, where a company is established to run the fund and members serve as directors of the company.

Similar to industry funds, SMSFs must run solely for the purpose of building retirement wealth for members. They’re not personal investment pots and cannot be treated as such.

Industry super funds and SMSFs: A comparison

Industry funds and SMSFs are hard to compare – the two don’t have many similarities beyond their intent to grow members’ retirement savings. Here are some of the starkest differences between the pair:

SMSF or industry super fund: Which is right for you?

If you’re tossing up between an SMSF and an industry or retail super fund, it’s important to weigh both options carefully.

What to consider before choosing an SMSF

If you’re considering setting up an SMSF, here are some of the pros and cons you should consider:

• Do you have a large enough super balance?
  SMSFs generally need a decent balance in order to be cost-effective. The administrative and compliance costs required to upkeep an SMSF are generally the same no matter a fund’s value and can outweigh gains realised by smaller funds.
• Do you have the necessary knowledge and skills?
  Managing an SMSF can be complex and time-consuming. Trustees need a clear vision for how they want their super to be invested and they must outline this in the fund’s investment strategy.

• Are you aware of the legal obligations involved in owning an SMSF?
  Beyond managing investments, trustees must ensure their SMSF is audited each year and complies with all superannuation and tax legislation. Professional advice is often recommended.

• Do you need additional benefits that SMSFs cannot provide?
  Unlike most industry funds, SMSFs don’t automatically provide insurance such as life cover, total and permanent disability insurance, or income protection. Trustees must arrange this separately, within or outside of the fund, or go without.

• Could you particularly benefit from an SMSF?
  Some small business owners can benefit from managing their own super through an SMSF. A common example is purchasing their business premises via their super fund. By law, the business must pay the SMSF market-rate rent. But because the business owner controls both the business and the SMSF, those rent payments effectively flow back into their retirement savings. At the same time, they retain control over the property, giving them stability and flexibility to meet their business needs.

• Do you plan to borrow through your SMSF?
  One of the advantages of an SMSF is their ability to borrow to invest, usually in property, through what’s called limited recourse borrowing arrangements (LRBAs), often called SMSF loans. These facilities allow the SMSFs to leverage into higher-value assets that might otherwise be out of reach.

Contemplating an SMSF loan? Check out these competitive options:

Pros and cons of an SMSF

Pros

• Wide investment flexibility (shares, property, term deposits, alternative assets)
• Ability to borrow within super
• Full control over investment decisions and strategy
• Can be tailored to members’ specific goals
• Potential tax advantages if structured effectively

Cons

• High responsibility, as trustees are legally accountable for compliance
• Ongoing costs are fixed and can outweigh returns for smaller balance
• No built-in insurances
• Requires time, expertise, and strong record-keeping
• Limited recourse in cases of fraud or theft

What to consider before choosing an industry super fund

On the other hand, these are the questions you might need to ponder if you are thinking of housing your super in an industry fund:

• Do you want the freedom to invest in assets you want to?
  Industry funds generally limit you to a menu of investment options, like conservative, balanced, or high growth. You won’t be able to hand-pick individual shares or properties, and for many people that’s a positive.
• Do you like to regularly check the fund’s performance?
  Industry funds publish performance and fee data, but you won’t be managing daily investment decisions. If you prefer to keep an eye on things without constant involvement, an industry fund may suit you.
• Do you feel like you are missing out on other possible investment options?
  Unlike SMSFs, industry funds don’t usually allow investment in direct property, collectibles, or more niche asset classes. If you’re happy sticking with mainstream, diversified portfolios, this may not be a concern.

• Do you plan to leverage debt in order to grow returns?
  Industry funds don’t allow you to borrow within your super the way SMSFs can through limited recourse borrowing arrangements. If you’re not planning to use debt, the simplicity of an industry fund may be an advantage.

Pros and cons of an industry super fund

Pros

• Lower fees thanks to economies of scale
• Professionally managed with little day-to-day involvement required
• Default insurance often included
• Diversified investment options suited to different risk profiles
• Access to certain dispute resolution and compensation schemes

Cons

• Limited flexibility, as you can’t hand-pick individual investments like property or shares
• No ability to borrow within super
• Less control over day-to-day management and investment strategy
• Investment options may not suit those seeking niche or alternative assets

Is it possible to have both an SMSF and an industry fund?

If you want the best of both worlds, you can certainly have both an SMSF and an industry fund.

However, you must take into account the fees and upkeep costs involved with both – you don’t want fees and charges to eat into your retirement pot.

It’s highly encouraged to talk to a financial adviser to know your options better and find the one that fits your investment strategy and retirement plans.

_{Image by Vitaly Gariev on Unsplash}