Ottawa pouring an extra $3.6B into veterans' benefits

The Liberal government today initiated an intricate overhaul of the system to compensate wounded ex-soldiers, but it remains to be seen whether it will be enough to placate a volatile community of Canadian veterans.

Liberals campaigned on promise to give veterans the option of taking the lump sum or a lifetime pension

Minister of Veterans Affairs Seamus O'Regan announced changes to veterans pensions during a news conference Wednesday. (Adrian Wyld/Canadian Press)

The Liberal government today initiated an intricate overhaul of the system to compensate wounded ex-soldiers, but it remains to be seen whether it will be enough to placate a volatile community of Canadian veterans.

The plan, rolled out by Veterans Affairs Minister Seamus O'Regan, is meant to address smouldering grievances among veterans that has led to protests and at one point spawned a class-action lawsuit.

As CBC News reported last week, the changes involve a two-part rejigging of the current system. Officials outlined how that would work on Wednesday and announced there will be an injection of fresh cash beginning on April 1, 2019. O'Regan said it will take time to introduce the required legislation.

Speaking on background before the announcement, officials estimated the changes would mean an extra $3.6 billion being poured into veterans benefits.

"We are delivering a package of benefits and supports, and financial security for those who need it," O'Regan said.

"I hope they believe we fought hard for them."

At issue is a tax-free lump sum payment, brought in a dozen years ago, to replace a system of pensions for pain and suffering injuries.

Prime Minister Justin Trudeau's Liberals promised in the last election to give veterans an "option" of taking the lump sum or a lifetime pension.

What the federal government is introducing Wednesday is a patchwork allowing veterans to take either the lump sum or a lifetime pension, which would deliver a maximum tax-free payment of $1,150 per month.

In addition, the Liberals will introduce another tax-free pain and suffering award on top of the existing one. It too will come in either lump sum or pension form that would give wounded veterans up to $1,500 per month, depending on their level of disability.

'Not everyone will receive the maximum award'

The second component involves a bundling of six existing income-replacement benefits — already available under the often-maligned New Veterans Charter — into one payment.

The new income replacement benefit will be taxable and it is meant for those "who are experiencing barriers to re-establishment due to a health problem resulting" from their service.

Significantly, it will be available to veterans, survivors for life, and orphans, should they need it.

The part of the plan that will draw the most scrutiny and perhaps political fire is the pain and suffering awards.

O'Regan was clear that "not everyone will receive the maximum award."

Under the current lump sum system, the maximum payout is $360,000, but documents obtained by CBC News under access to information show the average award is $43,000.

Translated to a pension, that means few wounded soldiers would ever see the entire $1,150 per month. Under the old pension act, the most severely wounded soldiers would have received up to $2,700 per month.

The Liberal government has long said its changes "would not seek parity" with the previous system, but officials emphasize that when the two tax-free benefits are combined, that would only mean a difference of $50 per month.

Officials said only about 12 per cent of veterans will be eligible for the maximum amount.

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O'Regan said he can't guarantee that the average veteran will receive the same or more compared to the old pension act.

"No, I cannot guarantee that. Each will be individually assessed," he said. But "any veteran receiving funding under the New Veterans' Charter will not be receiving less under this. In almost every circumstance they will be receiving more."

Before Wednesday's announcement, some ex-soldiers were clear on what their litmus test for success is: more money in their pockets. 

"The bar the government has to meet is parity with the pension act in terms of the net dollars in a veteran's pocket every month," said retired major Mark Campbell, who lost both legs in a blast in a booby-trapped ditch in Afghanistan.

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"It can only be a real pension if the benefits are tax free and if there is no clawback of their military pension as part of the disability payment."

Veterans Affairs officials used a bevy of charts and hypothetical scenarios Wednesday to demonstrate that combining all elements of the plan —  both tax-free and taxable benefits — most soldiers would be better off financially.

Sean Bruyea, a veterans advocate, said it is unclear how the changes will affect average veterans given the complexity of the changes.

"This is going to create a nightmare of anxiety among veterans who are going to wonder whether their lives are going to be made any better — or worse," he said.

O'Regan took pains to emphasize that the government will use the coming months, before the changes come into effect, to work with individuals to reassure them.