Thousands miss out on government benefits
TheStar.com – business/moneyville.ca
Wed Feb 16 2011. By Ellen Roseman
Many people don’t get government benefits they’re entitled to because the rules are too complex.
That’s a disturbing finding from Canada’s task force on financial literacy, which released its report last week after 18 months of work.
“Virtually every program has some degree of complexity in its regulations,” said Ottawa-based economist Richard Shillington, who did research for the task force.
Here are some examples, taken from his report.
The Old Age Security pension goes to those 65 or older, who have lived in Canada for the required time. About 160,000 people miss out, representing almost $1 billion in pre-tax benefits.
The Guaranteed Income Supplement goes to those 65 or older, whose income falls below a certain level. About 135,000 to 150,000 people, mostly older women, don’t receive it.
The Canada Pension Plan retirement benefit goes to those who worked and contributed to the plan. About 55,000 eligible Canadians miss out on it.
In contrast, very few people miss out on Quebec Pension Plan benefits because the provincial government does more outreach.
“Officials in Quebec use computerized databases to identify eligible seniors, who are then phoned or even visited to ensure they apply for their benefits,” Shillington’s report points out.
Taxpayers have to apply for these benefits, which are not paid automatically as soon as you become eligible for them.
Moreover, if you apply too late, you won’t get all the benefits you missed. Retroactive payments are limited to 11 months for OAS, GIS and CPP under federal law.
The 11-month retroactivity limit should be removed from CPP payments, which are financed entirely by employee and employer contributions, Shillington says in an interview.
“I’ve been telling the government: The CPP is not your money.”
The Canada Child Tax Benefit is a non-taxable amount, paid to families with children under 18 years of age whose income is below a certain level.
Ninety-five per cent of families with children who are eligible for the benefit actually receive it, according to the report. Parents must apply and can get back payments for only up to 11 months if they wait too long.
In a report last December, the Office of the Taxpayer’s Ombudsman said the government should do a better job of explaining the eligibility requirements for the child tax benefit.
Parents may be asked for proof of such things as marital status or citizenship after they’ve received benefits for some time.
Not providing requested documents results in cancellation of benefits and the recovery of benefits already paid – even if someone is entitled to benefits but just can’t understand what the government wants them to provide.
People often have trouble “obtaining clear, accurate and timely information” on what is needed to get their benefits re-established, the ombudsman said.
The Canada Learning Bond, introduced in 2006, gives low-income parents $500 in the year a child is born and $100 every year after that to contribute to a registered education savings plan.
Since there’s no requirement for matching funds, this is “free money,” Shillington says. Yet only 16 per cent – or one out of six eligible families – received the learning bond benefit.
I’m glad the task force took aim at governments, which don’t always talk to vulnerable people in ways they can understand.
To improve the take-up of benefits, government should: (1) Ensure that programs are clear and simple. (2) Simplify the application processes. (3) Improve outreach to raise awareness of programs and their eligibility rules.
Unless governments sharpen up their own financial literacy, not all citizens will get the benefits they deserve.
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