Q: My wife, 44, has recently received a total and permanent disability (TPD) payout into her super. Her balance is about $500,000, of which 90 per cent is taxable. As she has met a condition of release, we would like to withdraw some of the funds. How are lump sum payouts taxed given she is under retirement age? Also, are there advantages in starting a pension rather than making lump sum withdrawals on an ad hoc basis? Matt

A: While millions of Australians hold TPD insurance though their superannuation, less than 20,000 a year make a claim. This is why basic questions such as yours about this potentially important insurance – which provides financial assistance if someone is permanently incapacitated by serious illness or injury – can have wider appeal to those interested in their financial affairs.