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Is your superannuation in safe hands? Part 2 | 7.30 - YouTube
Channel: ABC News In-depth
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the sole superannuation is is a very tax
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effective way of saving for our
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retirement yes these retirees and others
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who plan to join them have gathered in
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Sydney's CBD to soak up some free advice
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about superannuation yes always happy
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for free advice I've had free advice a
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few times so I'm trying to keep us up to
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date as possible there is a wariness
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here about paying too much for financial
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advice the advice here might be free but
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it wasn't for tens of thousands of
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people who've learned they paid for
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advice they never received the banking
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Royal Commission found the best
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interests of super fund members were
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often ignored in large financial
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institutions were you aware that none of
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the tert members had personal financial
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planners attached to their accounts no I
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think people are likely to be skeptical
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of the way that they're charged for
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financial advice and of the
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qualifications of their financial
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advisors and hopefully they'll be
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skeptical about the way that the
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incentive structures are working so that
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they can see more transparently what's
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motivating their financial advisors and
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their brokers when they're offering
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advice
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the Royal Commission was most critical
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of retail funds which returned profits
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to both shareholders and investors
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industry funds which returned profits
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only to their members were largely
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spared
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well retail fans have taken tear or
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battering from the Royal Commission
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rightly so and there's been a lot of
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capital outflow most of that money will
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go to industry funds who've been very
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active trying to capitalize on the
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situation so their share of the pool
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will increase and the retail fund share
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will decrease I think that a number of
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industry funds came out of the Royal
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Commission I'm thinking well we got a
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tick somewhere behind ok and I think
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that that's that's a dangerous approach
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to have because I think they need
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greater vigilance and certainty to
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ensure that conduct issues don't creep
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in the Royal Commission found the laws
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governing super needed more effective
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enforcement role Commissioner Haynes
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said the two most important things were
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for superannuation funds to obey the law
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and to act consistent with community
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expectations and where they didn't for
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regulators to enforce the law if both of
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those things happen we're going to have
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a better system for members
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when 59 year old Michelle Bradley Smith
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witness retailed funds being grilled at
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the Royal Commission she realized she'd
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made a terrible mistake
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a blood laboratory technician and keen
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motorcyclist Michelle had recently
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switched her industries super balance of
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less than a hundred and twenty thousand
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into a high-risk retail fun I started to
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get really alarmed because they didn't
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tell me about any risks at all
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they were very persuasive it was like
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you know I couldn't get rid of them
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yeah just very smooth talking just made
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me want to change it all started when
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Michelle was cold cold at home in
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February last year just seven years
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before she planned to retire on the line
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was a financial advisor from a company
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called smart solutions promising a
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bigger return on her super he said that
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his company could make me an extra
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twenty four thousand as opposed to what
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the company I was with at the time could
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make me and it just sounded like you
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know twenty four thousand extra when I
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only had seven years of working left
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sounded good
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[Music]
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Michelle paid more than four thousand
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dollars for the initial advice and
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committed to thousands more in annual
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fees but over the next six months she
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watched her super balance shrink after
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them telling me that they were there to
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make me money and you know I lost ten
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thousand basically or seven thousand you
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know and that's not what I was there for
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I thought well you know I'm gonna be
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losing money by the time I'm 67 um might
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not even have a hundred thousand
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it's too risky when we contacted the
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company that Cole called Michelle a
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manager contacted her and immediately
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committed to refunding her fees smart
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solutions declined to respond to
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questions from 7:30 wanting a safer ride
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to retirement
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Michelle's switched back to her old
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industry fund and wants to caution
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others be very careful we put your super
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be very careful you know it's not like
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I'm 30 years old and you know still got
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a lot of working life to go I haven't
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and I need as much money as I can
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accumulate the performance of the fund
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you're in can make a life-changing
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difference to the amount of super you
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accumulate by the time you retire last
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December the Productivity Commission
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found that more than five million
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Australian superannuation accounts
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consistently underperform the difference
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is significant for a 21 year old it
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could be around half a million dollars
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in terms of foregone retirement balance
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that's the difference between being in a
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low performing and a high performing
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fund even if you were 55 years old today
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if you could be moved from a low
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performing fund to a high performing
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fund that could make in the order of
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$80,000 difference to your retirement
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balance it often amounts to a different
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sort of retirement but at the moment it
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can be the luck of the draw
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how should consistently poor performing
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funds be dealt with with a big stick
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being with ordered by a big regulator
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I think that that's that is a consistent
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message that has come out
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underperforming funds or funds that
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don't need to exist need to be
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consolidating already seen that
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occurring there's a lot of self
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selection occurring at the moment
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regulators have been given new powers to
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take those in charge of underperforming
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funds to court and strip them of their
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licenses many Australians don't choose
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which fund they're in but are instead
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defaulted into them a fund is
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effectively chosen on their behalf
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that's the default sector often chosen
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by the employer or mandated by an
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industrial instrument an award or an
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enterprise agreement changing jobs can
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lead to multiple accounts meaning
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multiple fees and insurance premiums
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about one-third of Australia's
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superannuation accounts ten million of
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them are what's called unintended
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multiples despite persistent campaign to
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get Australians to consolidate their
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super about 40 percent of us still have
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more than one account
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[Music]
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I've accumulated about eight super
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accounts in my working history 35 years
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the reason being is because you work for
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a company then you go you might move to
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the next company and they say you know
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we prefer you to have this super 50 year
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old Greg Halloran has been working with
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his hands since he was 15 years old
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mostly in the mines like most Australian
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workers greg has not been engaged in his
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superannuation and what that's meant for
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him is that as he's moved from job to
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job he's become a member of a new
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superannuation fund and he has not
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consolidated he's existing funds into a
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new fund as he has moved the result of
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that is that there's been a
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proliferation of his super accounts and
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that has resulted in obviously higher
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fees and ultimately that will compromise
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the amount of money that he has at
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retirement as far as you know having
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that nest egg I don't have that nesting
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because most of has been chewed up by
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fees through five of his super accounts
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Greg was also paying disability or loss
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of income insurance premiums if anything
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goes wrong at least you know that
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they're going to look after you for
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years ago something did go wrong when
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Greg's arm was injured while operating
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machinery and he had to stop working
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permanently only two of Greg's five
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policies have paid out it annoys me
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because you're paying in that case $650
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a month to be covered if anything goes
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wrong something had gone wrong and now
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they're declining to pain so how many
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other people are doing this - it's
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incredible they've took my money for
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years and years and years and now the
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time I need them and they're not there
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for me the problem at the moment is that
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one in four Australians are not aware of
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whether or not they have life insurance
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through their superannuation and one in
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six have duplicate accounts which means
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they're paying premiums on more than one
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account but they can't fully claim on
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both so it is important that insurance
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be more fit for purpose compulsory
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superannuation and the insurance that
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goes with it provides a strain in
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workers with
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much needed safety net now insurance in
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Super is a critically important means of
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ameliorating the underinsurance problem
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that we have in Australia we have
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seventy percent of Australian workers
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who obtained their insurance through
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their superannuation automatically that
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works very well as long as super fund
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trustees act in their members best
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interests and strike good deals on those
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insurance arrangements scandals over
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excess fees multiple accounts and
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insurance premiums for policies members
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are often not aware of have shaken the
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superannuation industry so if you're a
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full-time worker on a decent income and
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you're in a good fund the system is a
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terrific system for you but if you're a
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part-time worker on a low income and
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doing a poor fund to use all of those
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negatives then the system's not working
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as well for you as a mine
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all of the challenges the problems that
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we've pointed to are fixable but you
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need to be prepared to put member
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interests first and the great risk the
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great hazard I think in this debate is
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that that member interest really gets
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drowned out or dominated by the
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interests of industry participants but
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the point of the system is to deliver
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for members and that should be the goal
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of public policy
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you
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you
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