Retired colonel Pat Stogran, whose term as veterans ombudsman is not being renewed, speaks to reporters as discharged soldier Dennis Manuge looks on in Ottawa on Aug. 17, 2010.Sean Kilpatrick/The Canadian Press
Ordinary soldiers wounded in the line of duty, veterans with families and the most severely disabled of troops are the biggest losers under Ottawa's new system of compensating those who've laid down their lives for the country, an independent analysis says.
The detailed actuarial study, commissioned by the Veterans Ombudsman's office and obtained by The Canadian Press, was presented last year to Veterans Affairs Canada, but the department sat on the document and has not formally responded to its findings.
The 77-page report compared the system of lump-sum payments and qualified benefits under the New Veterans Charter and the old policy of guaranteed lifetime pensions, which was set up for soldiers following the Second World War.
The findings buttress the vocal arguments made by outgoing Veterans Ombudsman Pat Stogran, whose term the Conservative government has refused to renew.
Mr. Stogran, a blunt-talking former army colonel, accused federal bureaucrats this month of "penny-pinching" veterans and stonewalling or killing his efforts to improve benefits for former servicemen and women.
The study found senior officers, the ones at the highest end of the pay scale, benefited the most from the new system. The lower the rank, the worse off the soldiers become and it gets even more difficult if the wounded veteran is married and midway through their career.
"Based on our assumptions, we are of the opinion that the actuarial present values of benefits identified in our evaluation offered through the [new Veterans Charter]are lower, in the majority of cases, than the actuarial present values of benefits offered under the Pension Act," says a final report by Aon Consulting Inc., dated Dec. 18, 2009.
It determined that young, single soldiers come out slightly ahead under the new system - as long as their cash settlements are invested with a rate of return between 3.75 and 4 per cent. But critics have warned that many young, wounded troops are blowing their payments.
War widows and orphans are better off with the new system, the report says.
The study took aim at the lump-sum payments, which can be up to $276,000 for the most severe injuries. It concluded that over time the previous system left soldiers with more money in their pockets and that the existing one-time payout was too cheap.
Aon created an actuarial model and entered more than 600 profiles of potential cases, which were then evaluated. In almost every instance, taking into account gender, age, family status, level of disability and pre-injury income, soldiers at the bottom end of the pay scale came out poorer.
"The Disability Award payable under the [Veterans Charter]does not appear to be sufficient to compensate for these differences in the majority of cases," said the exhaustive study.
Critics have long argued that the lump sum payout was too cheap and point to Britain where injured soldiers are offered tax-free payments equivalent to $929,000.
Veterans Affairs has argued that wounded soldiers receive other stipends in addition to the lump-sum payment, including earnings loss protection and income support. The Aon study factored in those additional benefits and the numbers still came out the same.
That's because, unlike the previous system, most of the new benefits are subject to income tax.
Soldiers permanently disabled in Afghanistan, by a roadside bomb as an example, must pay tax on their permanent impairment allowance, while the old system of exceptional incapacity allowance was tax-free.
The taxation erosion of benefits gets even worse when you factor in where the soldier lives. Those in highly taxed provinces, such as those on the East Coast, get slammed even harder, according to the analysis.
Female soldiers, since they have a tendency to live longer than men, are also hurt by the new system.
The study encompassed both permanently and partially disabled veterans, as well as war widows.
Veterans Affairs is currently reviewing the impact of the Veterans Charter, and minister Jean-Pierre Blackburn noted the ombudsman's analysis.
"I am pleased that this study demonstrates that certain clients, such as survivors and orphans, benefit from the NVC. For clients for whom the NVC seems less advantageous, this is something that we are currently looking into," he said.
"Therefore, as I said many times, the Charter is a living document and something I am ready to act on. Soon, I will receive a full evaluation of all the services and financial aspects of the Charter and I will be in a position to make decisions."
He did not say why the department has not responded directly to Mr. Stogran's office.