Lifelong pension option for injured veterans instead of lump sum payments: reduces risk
Throughout the last Parliament, my Liberal Party colleagues and I have been advocating for the proper treatment of veterans, who have put themselves in harm’s way in the service of Canada. This is now continued with the Liberal Party’s promises to veterans which include restoring the option of a lifelong pension (instead of the lump-sum payment) to injured veterans and increasing the disability benefit.
What is the significance of the option of taking a lifelong pension instead of a lump-sum payment?
Recent turmoil in the financial markets reminds people preparing for retirement of the risk in the value of their retirement investments. A different but important risk, often overlooked, is the risk of outliving one’s savings.
When an injured veteran is given a lump-sum payment instead of a lifelong pension, even if it is worth the same to the average person (in technical language: have the same net present value for someone living an average lifespan), the individual veteran is still burdened by the risk of outliving his or her own money. An individual is burdened by a lot of risk in this respect, but this risk averages out for large groups of people — that is how the business of insurance works.
When the government pays out lifelong pensions to a group of veterans, it is lifting the burden from each individual veteran, but only taking on the much lower risk of the group average life expectancy.
The Liberal policy of offering lifelong pensions helps to lift an important burden from injured veterans.