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5.11.2 Calculation of a Lump Sum Payment
Calculation of a Lump Sum Payment
The conversion of the weekly amount to a lump sum is based on a life expectancy table provided by the Australian Government Actuary. Adapted tables using data from the life expectancy tables are listed in the Military Compensation MRCA Manuals and Resources Library/Actuary Tables Used For Age Adjusting Lump Sum Payments.
Age adjustments are made for males over age 30 at their next birthday and females over age 35 at their next birthday, as at the date of notification of the choice between a periodic payment and a lump sum. This age difference is due to the fact that women live longer than men on a total population basis.
It is important to remember to use the claimant's age at their next birthday, not their current age, to calculate their lump sum entitlement. Using the example of a weekly PI payment of $330.12 (max Permanent Impairment rate valid to 30 June 2016) for a male or a female aged 35 at their next birthday, the following rates are obtained from the actuarial table:
34 year old male: $330.12 x 1,288.6 = $425,392.63
34 year old female: $330.12 x 1,337.3 = $441,469.45
The amount paid as periodic payments prior to the claimant choosing their option is deducted from the lump sum payment if the 100% option is taken. Should only a percentage of the weekly PI compensation be converted to a lump sum, only the equivalent percentage of the payments made prior to the choice is deducted from the lump sum.
The table that contains factors for converting a weekly amount (under s68, 71 or 75(2)) to a lump sum under s78(5) of the MRCA where the election is made on or after 4 May 2015 can be found via the following link.