A man who stopped work because of Parkinson’s disease has failed to convince the complaints ombudsman his total and permanent disability payout was not enough, or that the policy was unfair.

The complainant had TPD cover under a group life policy within a corporate super plan, and was paid the minimum default amount of $22,349 in June 2022.

The policy stated he should be paid the greater of the minimum default amount or 10% of his annual salary up to the age of 65.

Because the insured was 62 at the date of disablement and had already reduced his hours due to his progressive condition, the salary calculation was below the minimum default payment.

But the insured told the Australian Financial Complaints Authority that salary continuance insurance payments he was receiving should be considered in the salary calculations. 

He noted “salary” was not defined in the policy, and argued the SCI payments were “equivalent to salary”.  

The complainant said that because his salary was being paid at a reduced rate at the time, it “did not represent his pre-disability earning potential”.

He added that “the TPD policy unfairly fails to take full account of a member who progressively reduces their hours of work and salary”.

However, insurer AIA argued the correct amount was paid, and the trustee, Equity Trustees Superannuation, said SCI payments should not be included as “salary”, considering the word’s “ordinary meaning”.

AFCA agrees with the insurer and trustee, confirming SCI benefits are paid “in lieu of salary by an insurer and are not paid by the employer.

“It is not necessary to perform any work or provide any services in order to receive them, which means they cannot be classified as salary or remuneration.”

The ombudsman says the payout was “fair and reasonable” and in accordance with the policy.

“AFCA empathises with the complainant and the arguments he has raised about the policy not taking into account a member who progressively reduces their hours of work and salary.

“However, under section 1055(7) of the Corporations Act 2001, AFCA cannot make a determination of a superannuation complaint contrary to the terms of a policy of insurance or the governing rules of a fund.”  

See the full ruling here.