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Politics Ottawa to save money with new veterans' pension plan, despite saying it will cost billions

The federal government will save nearly $500-million over five years as a result of its move away from lump-sum payments to monthly pension payments for life for disabled veterans. But Ottawa is not committing to using those savings to close gaps so that all former military personnel are compensated equally.

The lifetime pensions, a Liberal campaign promise, have been targeted by critics who say they fail to bring equality to a system in which veterans who applied for benefits in 2006 or later get less compensation than those who applied in earlier years.

When the pensions were unveiled four days before Christmas last year, the government said they “represent an additional investment of close to $3.6-billion to support Canada’s Veterans.”

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And on Jan. 31, Seamus O’Regan, the Minister of Veterans Affairs, told the House of Commons: “With our recent announcement of a Pension for Life, this government’s total investment in veterans in 2½ years is $10-billion” – a figure that includes the $3.6-billion for the pensions.

But the “additional” money for Pensions For Life, which come into effect in April, 2019, will be not be spent any time soon.

Related: Ottawa commits $165-million to compensate 270,000 shortchanged veterans

In fact, the government predicts in its most recent budget it will save $84-million in the next fiscal year and more than $100-million in each of the next four years as a result of the pensions program.

The savings are emphasized in the accompanying regulations, which were published in August.

Treasury Board guidelines dictate that a cost-benefit analysis looking forward 10 years must be included in regulations for any new federal program, unless that program will cost less than $1-million annually or $10-million total. But there was no cost-benefit analysis attached to the Pensions For Life regulations.

Veterans Affairs Canada explained in an e-mail to The Globe and Mail that the department was not required to produce anything more than the analysis for programs that will have a low financial impact.

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Disabled veterans who applied for benefits prior to 2006 receive regular pension payments. The New Veterans Charter replaced those pensions with a system based, in large part, on lump-sum payments that now pay up to a maximum of $365,400 – payments that vets said were far less than the value of the regular payments for pre-2006 veterans.

The government says the lifetime pensions that start next year will pay newer veterans who choose them over lump-sum payments as much or more than the value older veterans receive in their regular payments. But veterans advocates, including Sean Bruyea, have done calculations to show that a significant disparity will still exist – and a Library of Parliament analysis has confirmed that is the case.

Had the government given the money that will be saved “directly to veterans, it not only would have granted parity to veterans, but it would also have fulfilled their Liberal campaign promise to reinstate lifelong pensions” like those offered under the Pension Act, Mr. Bruyea said.

“The political rhetoric around spending $3.6-billion on this program is really quite farcical,” he said. “At the very least, the costs of these new programs are cancelled out by old programs. This is a cost-savings venture for these guys."

Officials with Veterans Affairs explained in a recent phone call with The Globe and Mail that the government says the new regular-pensions program will cost an estimated $3.6-billion because, over the lifetimes of disabled veterans who are currently in the system or of those who are injured within the next five years, the pensions are predicted to collectively pay out that much more than the lump-sum payments.

The $3.6-billion is money that has been earmarked for future benefits for veterans, and the amount will change, the officials say, as new veterans apply for benefits and as others die.

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But, because the lump-sum payments will stop, “we will draw down less cash” on an annual basis, said Christina Hutchins, the department’s director-general of finance. “So, when I net that out, the overall cost is insignificant.”

Mark Campbell, a severely disabled Afghanistan veteran who was part of a group that took the government to court in an unsuccessful bid to achieve parity with the Pension Act veterans, said he was surprised to find out that the Pensions for Life will not cost the government anything, “when the Minister has been trumpeting all of the new monies that have been injected into veterans' benefits, Pensions For Life being the centrepiece."

And Phil McColeman, the Conservative critic for veterans affairs, said it’s clear that the Pensions For Life are a “shell game” and that “there is no real additional money being added into the system.”

Mr. O’Regan accused Mr. Bruyea in a column in an Ottawa newspaper called The Hill Times earlier this year of “stating mistruths,” making “numerous other errors,” and writing to “suit his own agenda” when the veterans' advocate asserted that the Pensions For Life would still leave newer veterans with less compensation than those who applied for benefits before 2006.

But bureaucrats with Veterans Affairs have said Mr. Bruyea’s figures are largely correct. And Mr. Bruyea is now taking Mr. O’Regan to court, seeking $25,000 for the damage he says the minister’s column has done to his reputation.

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