Source: The Canadian Press

The idea of pension reform appeared to be on life support earlier this year but received a jolt of adrenalin Monday as the provinces and Ottawa agreed to push ahead with a proposal to modestly increase Canada Pension Plan benefits.

While acknowledging a lot of work remains to be done, Finance Minister Jim Flaherty hailed the agreement he achieved with his provincial counterparts at a golf resort on Prince Edward Island as a “significant step forward.”

Flaherty said a majority of provinces are in favour of a gradual increase in CPP benefits. The ministers also agreed that any changes would have to be fully funded, although Flaherty didn’t offer details on what that would mean.

But not everyone is on board. Alberta Finance Minister Ted Morton expressed his province’s unwavering opposition to improving the CPP.

“We think it’s a gross overreaction and that the problem of underfunding is limited to a small sector of the Canadian workforce and that CPP expansion hits everybody,” he said. “Secondly, we think CPP is a form of payroll tax and it’s a job killer.”

Morton said increasing the CPP also isn’t fair for post-baby boomers because they will contribute more to the plan than they will pocket when they retire.

Flaherty said a “couple” of provinces did not agree with the proposed changes, but he declined to identify them.

“We were not unanimous, but certainly the substantive majority view is that we should proceed,” Flaherty told a news conference.

“Now there’s a lot of work to be done. You know, what does modest mean? How do we go about doing this?”

The ministers have asked their officials to look at the details of improving the CPP and to complete that work by the fall. After officials report back to the finance ministers, Flaherty said it would be up to each province to decide if the plan works for them.

“But I am pleased that we have substantive majority support on this already,” he said.

“We have a clear direction and there’s lots of work to be done by our officials. I think this is a significant step forward.”

The talks on pension reform, which are two years in the making, gained momentum last week when Ontario backed a plan that would include a moderate, gradual and mandatory expansion of the CPP.

Using a golf analogy, Ontario Finance Minister Dwight Duncan said the ministers hit a good tee shot but have a long par-5 hole ahead with lots of hazards.

“This is where the tough decisions start to happen but I’m confident we can build on the consensus we’ve achieved to this point,” Duncan said.

Ontario has also proposed a two-pronged approach that would give financial institutions a bigger role in retirement savings while also improving the CPP.

Quebec’s minister of employment and social solidarity is taking a wait-and-see approach.

“We aren’t for or against what is proposed, however, there are questions on the table and we need to address them as soon as possible,” Sam Hamad said in French. “These proposals came on Thursday and we will take the time to look at them.”

The idea of a modest increase in CPP benefits falls short of what many unions are calling for. Ken Georgetti, president of the Canadian Labour Congress, wants benefits doubled.

About 125 people staged a peaceful demonstration organized by unions outside the resort in Lakeside where the ministers held their day-long meeting.

Larry Brown, secretary-treasurer of the National Union of Public and General Employees union, said about one-third of Canadians are retiring with only CPP and Old Age Security, which means they are living on about $17,000 a year.

“That’s poverty-level retirement wages,” he said.

“At least a third of Canadians, maybe more, that’s essentially all they have to retire on. … That’s a crisis that’s not looming. It’s already on us.”

Shelly Ward, president of the P.E.I. union of public sector employees, agreed.

“This is not just a labour issue, it’s a very important Canadian issue that needs to be addressed right now and right away,” she said. “We certainly need to make sure that when people do retire, that they don’t retire into poverty.”

To reform the CPP, two-thirds of the provinces representing two-thirds of the population have to agree to the changes.

Canada’s main small-business lobby group, the Canadian Federation of Independent Business, is opposed to anything that would increase CPP premiums.