TPD still a super headache

There is a need for a better and more rational definition of total and permanent disablement (TPD) to help alleviate pressure on superannuation fund trustees, according to the Association of Superannuation Funds of Australia (ASFA).

ASFA used a supplementary submission to the Productivity Commission inquiry into the Efficiency and Competitiveness of the Superannuation System to point to the difficulties around TPD insurance offerings by superannuation funds.

"The limited, somewhat ‘all or nothing', nature of the regulatory definition of total and permanent disablement has led to difficult, and sometimes protracted, decision-making for trustees," it said.

"In order to determine whether the member meets the regulatory definition the trustee must be reasonably satisfied that the member's ill health makes it unlikely they will ever again engage in gainful employment for which they are reasonably qualified. This is not a straightforward decision, especially with respect to younger members and/or relatively soon after the disability has occurred, and necessitates the assessment of conflicting reports from medical and occupational specialists."

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The submission claimed that, in particular, the regulatory definition did not provide for the possibility of subsequent rehabilitation or recovery, or for future changes in technology, that might permit a member to return to work.

"There is evidence that framing a person's medical condition in terms of their ‘disability', as opposed to their ‘ability', can have a deleterious effect on their psychological condition," the submission said. "Furthermore, the ‘one time' assessment as to disability can, in some circumstances, act as a disincentive for a member to recover some ability, as this may cause them to miss out on being paid a lump sum TPD benefit."

The ASFA submission said that in response to this phenomenon some funds were looking to introduce a TPD benefit paid in instalments, where after an initial assessment as to the member's disability the trustee made a part-payment of the TPD sum insured and a further assessment is made prior to a second or subsequent instalment being paid.