Resignation benefits

Members who resign from a superannuation fund are entitled to resignation benefits, some or all of which may be subject to preservation rules.

How benefits are paid

Under most superannuation schemes resignation benefits are paid as a lump sum, although under some defined benefit funds an employer’s contribution component may be paid as a deferred benefit on retirement.

Where there was redundancy or retrenchment

Some employer-sponsored and public sector defined benefit funds also pay enhanced resignation benefits if the termination of fund membership is due to redundancy or retrenchment from employment. Many funds require sponsoring employers to certify a redundancy or retirement before the benefits are payable.

Retirement benefits

Members who reach retirement age under a scheme (which may be defined as age 55 or beyond) are entitled to retirement benefits, subject to possible preservation rules ( see Preservation on page† 1011).

How benefits are paid

Most superannuation schemes pay retirement benefits as lump sums or at least offer a retirement pension with an opportunity to convert some or all of the pension into a lump sum. Some schemes offer retirees the opportunity to purchase allocated pensions with their retirement lump sums.

Disability benefits

There are usually two types of disability benefits in superannuation funds:

Superannuation disability claims are often very long and complicated.

What is total and permanent disability?

Total and permanent disability will be defined in the fund’s trust deed, although the definition may be varied by the definition in any relevant group insurance contract.

Under the standard definition:

Some variations may require a permanent incapacity for any gainful employment or any occupation that the member could be retrained to undertake.

Total and permanent disability benefits in accumulation funds

A total and permanent disability benefit in an accumulation fund usually consists of:

Total and permanent disability in defined benefit funds

In defined benefit funds, total and permanent disability benefits are often calculated in the same way as retirement benefits, and can constitute substantial additional payments.

These extra benefits may be insured or underwritten in whole or in part by a group life insurance company.

How benefits are paid

Most total and permanent disability benefits are paid as lump sums, although under some funds they may be payable as lifetime pensions or a combination of the two.

Salary continuance

Salary continuance benefits are usually paid monthly for up to two years if a member is unfit for their usual occupation because of an injury or illness. Some benefits may be payable beyond two years — perhaps to age 65.

Under some funds, the benefits may only be payable beyond two years if a member is unfit for their usual occupation or any other suitable work given their education, training or experience.

Qualifying periods

There is often a qualifying period of up to three or six months.

Effect of other payments

Salary continuance benefits are invariably offset against statutory workers compensation weekly payments and sometimes also workers compensation lump sums, Centrelink payments and other disability insurance benefits.

Termination of employment or membership

Under some superannuation funds, termination of employment or membership may affect salary continuance payments.

Other benefits

Some salary continuance insurance policies include additional benefits in the form of monthly or weekly payments for specific injuries or sicknesses, nursing care or rehabilitation.

Death benefits

When a member dies, a death benefit is payable to their dependants, interdependents or personal representative. Death benefit claims are often emotionally charged and complicated.

Eligibility for death benefits

Under many group superannuation funds, disability and death benefits are offered on an automatic acceptance basis — that is, new members need not complete health declarations and are eligible for benefits up to certain limits regardless of pre-existing disabilities.

Some funds allow extra cover to be taken out. Usually evidence of good health will be required.

What the benefit consists of

The benefit usually consists of:

An insurance benefit may still be payable if a member dies outside the insurance cover period, where the member:

How benefits are paid

Most defined benefit funds pay the equivalent of a full retirement benefit on the death of a fund member.

Others pay pensions to surviving spouses, children or interdependents of deceased members.

Changing the insurer

Most group insurance contracts are entered into by trustees for limited periods — usually three years — so the insurance benefits and the insurers providing those benefits may change periodically.