Source: The Canadian Press

The consensus around the cabinet committee table, one cold winter day earlier this year, was to let the pension-reform file die an early death.

The provinces had backed off. Ottawa was armed with research concluding retirement income was adequate for most people. Any change to the system was laced with complicated pros and cons that would be tough to sell.

Letting the issue fade away, perhaps with the help of a few regulatory changes and tax incentives here and there, would be easy enough.

But the consensus lacked a key player: Prime Minister Stephen Harper. He wanted to see significant action on pensions, and he wanted it right away, sources say.

The prime minister’s wishes have been granted.

After months of appearing neutral or even dismissive of pension reform, Finance Minister Jim Flaherty suddenly informed his provincial colleagues this week that he thinks major changes are necessary, and he wants their support.

Financial institutions should be given the regulatory freedom to provide more pension options at low cost, especially to self-employed people and small businesses. And the Canada Pension Plan should be gradually and moderately expanded, he said.

Still to come are any details about how much the CPP benefit could increase and how much premiums might rise. But the fact Ottawa has agreed in principle to such changes is being welcomed by many pension experts.

“This is actually a tremendous breakthrough,” said Susan Eng, vice-president of advocacy for the huge seniors’ lobby group, CARP, and a tireless advocate for pension reform.

With Ontario and some other provinces onside, there is widespread optimism that when federal and provincial finance ministers meet in Prince Edward Island this Sunday and Monday, they will agree to push the plan forward.

“I think it’s one the provinces can buy into,” said economist Jack Mintz, who heads the University of Calgary’s School of Policy Studies.

Ottawa couldn’t move immediately on Harper’s orders last winter, since it had already committed to public consultations. But the consultations this spring served to validate Harper’s instinct on the issue.

Ordinary citizens and analysts alike repeated that the future for many retirees looked uncomfortable. Financial services companies have been competing against each other to offer new alternatives. Unions, retired people and municipalities have been forming alliances pushing the federal and provincial governments to step up.

“He (Flaherty) felt the heartbeat of Canada on this one,” said Ken Georgetti, president of the Canadian Labour Congress, who sent staff laden with data to many of the hearings.

“There are a lot of votes out there on this issue. It’s grey power.”

Mintz, a pension expert whose advice has been sought frequently by the federal government, watched a similar sentiment arise in the pension expert community.

He held a key conference in April, where the Alberta finance minister, Ted Morton, hogged the spotlight by saying he had no interest in major pension reforms for another 10 years.

And on Friday, Morton reiterated his position, calling the federal and Ontario proposals an “overeaction.” He said low-income workers would be hurt and that higher income earners would get benefits they don’t need.

But Alberta politics aside, the country’s top pension specialists and key business leaders at the conference concluded one by one that retirement income in Canada was heading down an unreliable path. Something needed to be done, and many experts advised a combination of private-sector innovation and a more generous CPP.

“There’s was almost a consensus in the room,” Mintz recalled Friday.

Ontario Finance Minister Dwight Duncan had a more gradual conversion.

“There wasn’t a eureka moment,” he said in an interview this week.

Duncan represents a province where the recession hit hard and no one was in a mood to pay increased CPP premiums _ especially after being hit with the Harmonized Sales Tax. Ontario is also home to many of the financial institutions that have lobbied against a larger government role in retirement savings, arguing that they should be unshackled to take the lead.

But this spring, Ontario officials hit the road and held numerous public hearings where they, too, heard a resounding message for government to act.

All the evidence suggested “there are challenges in the system,” Duncan said.

The debate is far from over.

Two-thirds of the country needs to agree, if changes are to be made to the CPP. With Ontario onside, and some other provinces likely following suit, that critical mass can probably be found.

But Alberta’s support is not assured. And while the province is not big enough to veto the proposal, its political weight can’t be ignored.

Plus the country’s main small-business lobby group, the Canadian Federation of Independent Business, is dead set against anything that would increase CPP premiums, by even a penny.

“I think it’s just disgusting,” said CFIB president Catherine Swift. “I’m shocked. Really shocked.”

The group is more than just a thorn in the side of the federal government. Its members are a key constituency for the Tories.

The biggest challenge is figuring out the details, once a consensus is reached, insiders agreed. How fast should CPP premiums and benefits rise, and by how much? How will the government ensure that financial institutions won’t gouge contributors with high fees? Will the proposals take care of the lower class, and if not, should the Guaranteed Income Supplement be increased?

“From what I understand, I don’t think even the governments have any numbers yet,” Mintz said. “It could be another year or two before they work out the changes.”