Exit fee

Pays for:
Converting your investment into cash and sending your money to you. Sometimes the exit fee is a penalty for not staying in a product for long enough. Make sure you know what fees you will have to pay if you leave.

Also known as:
Redemption fee, withdrawal fee, benefit payment fee.

Cost:
There are different bases. There may be no exit fees or it could be 1% reducing to nil after 12 months; a fixed fee of 0.5% to 1.5% of the amount withdrawn or possibly a handling charge of, say, $20 to $100.

Tips:

• Find out whether or not the fee applies to your initial investment only (that's likely if they are called 'foundation units') and not to any money you invest later.
• If making long-term decisions, a penalty for withdrawing your investment within the first 12 months should not be a big concern. However, you should investigate any penalties if investing for more than 12 months.
• Before investing, find out if there is an exit fee and what it is after one, three, five and 10 years. If the provider quotes a percentage, change that to dollars based on the amount you expect to withdraw.
• Find out if the exit fee applies to any withdrawal you make, not just the final one. If the exit fee is at a level that recovers just the handling charges, you should expect the fee to be charged for each withdrawal.
• A handling charge of about $50 should be enough to cover the providers costs, although less is better. If it's more, ask why