Claiming invalidity benefit

How invalidity benefit is calculated

The invalidity pension benefit payable on total and permanent incapacity is based on the lump sum you would have received if you had worked to the age of 60. Generally, for this purpose, if you had been contributing at an average of more than 5% of your salary, it is assumed that you would have continued to contribute at that higher rate through to the age of 60.

However, if you had been contributing at less than 5%, your benefit is worked out on the basis that your contributions would have been immediately increased to 5%, and that you would have continued to contribute at that rate until the age of 60.

The lump sum obtained from this calculation is then converted to an indexed pension. The pension conversion factor used is 11.00, which is the one that would have applied to you if you retired at the age of 60. In other words, your lump sum is divided by 11.00 to obtain the amount of indexed pension.

Note: If you had been contributing at more than 5% for less than three years before you commence sick leave for the final time, you may not be eligible for benefits calculated at the higher average rate.

Benefit choices

The following invalidity benefit choices are available if you are retired on medical grounds before the age of 60.

Members not subject to a limited benefits restriction

Invalidity pension with no lump sum

If you choose this option you will receive an indexed pension which is made up of the three benefit components (that is, your contributions and those of your employer).

Invalidity pension plus lump sum

If you choose this option you will receive a lump sum of your member component and the employer component as indexed pension.

Limited Benefit Members (LBM)

If you have been classified as a LBM your invalidity benefit is payable as a lump sum of your accrued benefit multiple if you are medically retired for any reason within three years of becoming a member. This applies irrespective of the condition which is causing your retirement.

Lump sum

This choice is only available to LBM’s. The only benefit payable is a lump sum, which is made up of both employer and member components accumulated to the date of invalidity retirement.

Immediate access to lump sum benefits for terminally ill members

We can allow you to have an additional benefit choice if your invalidity retirement is due to a terminal illness, or if you suffer from a condition which is sufficiently severe that you will need personal or nursing care on a daily basis within two years. In these circumstances, you can choose to receive, instead of the normal invalidity benefits, an immediate lump sum based on your accrued Benefit Multiple. That is, the lump sum does not take account of your prospective benefit multiple to the age of 60.

To qualify for this option, you must send us a certificate from at least two medical practitioners (one of whom is not treating you), who have experience in the condition affecting you. The certificate must confirm that your condition is terminal, or that the severity of your illness is such that you will need personal or nursing care on a daily basis within two years. More details about this option are available from your personnel section or from the PSS website csc.gov.au

Note: If you choose this option, the entire benefit is paid as a lump sum. No additional benefit will be payable to a spouse or eligible beneficiary upon your death.

Surcharge debt

Any accrued surcharge debt remaining at the time an invalidity benefit (other than a partial invalidity benefit) becomes payable is recovered by reducing the PSS benefit.

Normally your PSS invalidity pension is reduced to recover a surcharge debt, but you can request the debt to be recovered from your lump sum if you wish. The reduction to your pension is calculated using a special set of factors that vary according to your age at the time the benefit becomes payable.

Superannuation contributions surcharge (factsheet)

Terminally ill members

Fast-tracking requests

We can take steps to ensure that applications for invalidity retirement are processed with extra speed if you are terminally ill.

Where the illness or condition appears terminal, arrangements should be made with your personnel section to be medically examined by an AMP from one of our approved medico–legal service providers.

When your personnel section sends the results of that examination to us, together with any supporting reports from your treating specialist and general practitioner, they should request that your case be expedited. Under normal circumstances, we will finalise the case within three days.

Tax arrangements

Employees who are exiting their employment by any means because they are terminally ill may be eligible to receive any lump sum component of their benefit tax–free. In order to be considered for this tax concession, the case evidence should include medical opinions which shows they meet the ATO definition of terminally ill, which is explained below.

A terminal medical condition exists if:

• two registered medical practitioners have certified jointly or separately that the member suffers from an illness, or has incurred an injury, that is likely to result in the member’s death within 24 months of the date of certification
• at least one of the registered medical practitioners is a specialist practicing in an area related to the illness or injury, and the certification period has not ended for each of the certificates.

Pensions

Adjustment of pensions

Invalidity retirement pensions are subject to annual cost–of–living adjustments based on movements in the Consumer Price Index (CPI). You will receive a notice of the adjustment, together with your PayAs You Go (PAYG) payment summary, from us in early July each year.

Review of invalidity pensioners

Following your invalidity retirement, we may, from time to time until your 60th birthday, ask you for information about any employment you may be undertaking during your period of invalidity retirement. It is important for you to know that if you fail to provide information about employment and you don’t have a reasonable explanation, your invalidity pension may be suspended until the requirement has been satisfied. It may then be cancelled after 12 months’ suspension.

Reduction of invalidity pensions on account of personal earnings

Invalidity pensions can be reduced where a retired member under the age of 60 works and receives income above certain fixed levels. You must provide us with information about any income you may be receiving as a result of working after your invalidity retirement. If you rejoin PSS your invalidity pension will be cancelled. If you believe you may be affected, you should contact us for further information.