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VANCOUVER (Reuters) - Canada's federal government and provinces agreed in principle on Monday to support a compromise plan to expand the national pension plan that would see premiums raised moderately over time to provide greater payouts for pensioners.
The proposed changes, if formally approved by the provinces, would start in 2019 and be phased in over seven years, according to the plan signed by eight provincial finance ministers and federal Finance Minister Bill Morneau.
Reforming the Canada Pension Plan, or CPP, requires the support of the country's federal government plus seven of the 10 provinces, representing two-thirds of the Canadian population.
Like other governments around the world, Canada faces a challenge to provide for its aging population. The CPP has been deemed by some experts as insufficient to provide enough income in retirement without being supplemented by a workplace pension.
Fewer employers are offering workplace pensions and those that do are reducing the benefits of those plans, prompting advocates to lobby for CPP reform.
The previous federal Conservative government refused to consider changes, which prompted Ontario's Liberal government to come up with its own plan to boost retirement security for residents in the absence of a national solution.
The election of a federal Liberal government last October opened the door to new cooperation, although securing the required backing among provinces proved challenging.
The proposed changes, following a day of talks between Morneau and his provincial counterparts, are revised from Ontario's proposal and will now be considered by the provinces. If approved, a final agreement could be formalized within weeks.
"I think we have reached a balanced approach to satisfying the objectives that were set out - that is a modest enhancement, that is fully funded and is affordable," British Columbia Finance Minister Michael de Jong told reporters.
The agreement means Ontario will likely not go ahead with its proposed Ontario Retirement Pension Plan.
Quebec, which has its own pension plan, did not sign on but expressed its support for "modest, targeted and gradual enhancements." Manitoba is the only other province that did not sign the deal.
Under the current plan, both employers and employees contribute 4.95 percent of income up to a C$54,900 ($42,927) cap. The maximum payout is C$13,110 annually, lower than that of other wealthy nations.
With the new deal, the earnings cap would rise to C$82,700 by 2025, with the income replacement level increasing to one-third of the cap.
Additional reporting by Matt Scuffham in Toronto; Editing by Leslie Adler and Peter Cooney