After auditing over 4,000 Canada Pension Plan recipients between 2000 and 2004, CARP found that approximately 15% of those audited were receiving lower monthly benefit distributions than they were entitled to. Assuming that the 15% is extended to the rest of Canada’s two million pensioners, the federal government could owe up to $1 billion in retroactive benefit payments, according to the Toronto Star.
According to the study, 60% of underpayments – what CARP calls ‘entitlement benefit errors’ – occur because people do not take advantage of a rule that allows workers to accrue pension credits when taking time off to rear children. This child rearing dropout provision can’t be applied automatically, since the relationship between child rearing and time off work may be spurious, so many people fail to apply for such benefit accrual, according to the Star.
Another 30% of underpayments are due to a failure to split pension credits after a couple divorces, according to the report.
The federal government seems to be responding to the problem, with Deborah Wallace, the head of the federal department responsible for pensions, claiming that it has already begun to investigate why more people don’t take advantage of the child rearing pension credit, according to the Star.
Retroactive application of the credit may be difficult, however, since current pensioners often had children decades ago. It will be difficult to discern the exact dates of leave for child rearing.
In order to clear up any future confusion, CARP is recommending that the federal government simplify the pension plan application forms, since most errors occur due to incomplete or incorrect applications, according to the Star.