Canada and provinces reach preliminary deal on pension plan reform

Mon Jun 20, 2016 9:47pm EDT
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By Julie Gordon

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.   Continued...

Canada's Finance Minister Bill Morneau speaks during Question Period in the House of Commons on Parliament Hill in Ottawa, Ontario, Canada, May 31, 2016. REUTERS/Chris Wattie