Excessive exit fees on superannuation products?
April 9, 2008 by Josie Kay · Leave a Comment
Q. Hi. I was listening to your program this morning 06/04/08 re the guy who rang about the 60% termination value on his super.
I have worked in super for 32 years in the private sector ( life offices). I am concerned that this guy may be unaware of termination costs. These were set by the life offices to recoup paid commission to “advisers” before the term of the contract was satisfied.
These terms were for mainly 10 years and were introduced in the late 1980’s early 1990’s. So if this guy has a “termination penalty” of 60% NOW, there is certainly something very wrong with his contract.
I haven’t heard of a penalty of 60% that high. As you know, the life offices were held hostage by the “sales forces” in order to enforce higher commissions from super products.
Hence the now crackdown on these guys having to be licensed to sell all financial products. The life offices were also totally gutless in standing up to these stand over sales forces because of “sales targets”.
I would suggest a segment on your show outlining the consequences of termination penalties and also why they were imposed.
It was not just the life offices saying they wanted more money but also the sales forces saying they wanted their commissions UPFRONT which means the life office had to recoup any overpaid commission if the contract was terminated early within the contract period.
Josie’s answer: Thanks for your comments and totally agree. I have been in this industry for nearly two decades now and started life in the corporate superannuation area……
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