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Canada's Prime Minister-designate Justin Trudeau (R) greets Ontario Premier Kathleen Wynne at Queen's Park in Toronto. The premier campaigned tirelessly for him.

Mark Blinch/Reuters

Pension talks with the provinces are already heating up following the election of a new federal Liberal government, but major questions remain as to the nature of Canada's savings problem and how to avoid doing more harm than good.

It is a file that is set to move quickly, with several federal-provincial meetings expected in the coming months. Hanging over these talks are broader concepts of inter-generational fairness, individual responsibility and the role employers should play in providing Canadians with a comfortable retirement.

The concern is that while the Canada Pension Plan is widely viewed as a successful, low-cost savings program, it simply doesn't pay enough. The average CPP payment is $7,682.76 a year. Experts say most current or soon-to-be retirees will be fine given that they were employed in an era where workplace pensions were common, providing retirement revenue in addition to CPP and Old Age Security. However, private workplace pensions that offer guaranteed cash in retirement are quickly heading for extinction, meaning younger Canadians will need to start saving more. A key issue is whether government should make that extra saving mandatory through CPP expansion or encourage Canadians to save more on their own, which was the preferred choice of outgoing Conservative Prime Minister Stephen Harper.

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Prime-minister-designate Justin Trudeau and Ontario Premier Kathleen Wynne held a private meeting Tuesday at Queen's Park and said in a statement that they "made progress" on pension reform.

Reforming the CPP is one of several shared priorities of the two Liberal leaders – along with infrastructure spending and a new national climate-change plan – that will require major negotiations between Ottawa and the provinces. But it remains unclear what new federal-led pension talks will mean for Ontario's plans to go it alone with its own approach, called the Ontario Retirement Pension Plan, by 2017.

Low-income Canadians

Pension expert Keith Ambachtsheer, who agrees reform is needed, said one problem that has largely been overlooked is that an expanded public pension could actually be bad news for low-income Canadians.

Forcing low-income Canadians to pay higher pension premiums will leave them with less money now. Yet in retirement, a higher CPP benefit could force a clawback of Guaranteed Income Supplement benefits aimed at low-income seniors.

"It could potentially impact low-income workers negatively depending on how you set up this new supplementary deal," he said.

Mr. Ambachtsheer said it is one of many key details that will need to be debated and worked out as Ottawa and the provinces move ahead with reform. He outlined some of these issues in a paper released in September. He recommends starting new payroll contributions at income above $25,000, rather than $3,500, but notes that could mean others would have to pay more.

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More broadly, governments will need to explain what problem they intend to fix. Ontario's plan is targeted at Canadians who do not have a workplace plan. That has led to considerable lobbying from businesses seeking exemptions.

Advocates for an across-the-board expansion of the CPP, including the Canadian Labour Congress and the seniors advocacy group CARP, argue that allowing exemptions was a policy mistake by Ontario that could now be corrected given the new federal desire for negotiations on expanding the CPP.

"There shouldn't be a preconceived notion as to what the answer is," Mr. Ambachtsheer said.

Does Ontario still go it alone?

Neither Mr. Trudeau nor Ms. Wynne took questions from the media following their meeting. Instead, they issued a joint statement that included a reference to pension talks.

"In particular, we made progress on our mutual commitment to build greater retirement security for Ontarians and Canadians," they said. "The incoming federal government and the Government of Ontario will be active partners in the national discussion on pension enhancement, including the CPP and ORPP."

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The Ontario government took a lead role in organizing provincial support for a CPP expansion in recent years, but the federal Conservative government ultimately rejected the idea in favour of voluntary options to encourage Canadians to save more.

Out of frustration with Ottawa, Ms. Wynne announced that Ontario would be going it alone with a new Ontario Retirement Pension Plan that would begin to be phased in as of 2017. Officials indicated this week that a Liberal federal government would reverse the previous government's refusal to co-operate with Ontario on implementing the provincial plan. That means the province could rely on the Canada Revenue Agency for help in collecting new premiums.

What happens next?

There are several meetings between Ottawa and the provinces over the coming months that could serve as potential deadlines or opportunities to discuss the issue. Mr. Trudeau has promised to invite the premiers with him to Paris in December to attend global climate-change negotiations. He has also pledged to hold a first ministers meeting focused on climate change within 90 days.

In addition, federal, provincial and territorial ministers normally meet face-to-face every year in December, and that has historically been the main forum for discussions on pension reform.

The CPP is a joint program of both levels of government. Changes to CPP require the support of Ottawa as well as two-thirds of the provinces representing two-thirds of the Canadian population. Alberta has historically been resistant to CPP reform, but the new NDP government led by Premier Rachel Notley is believed to be more open to expanding the CPP. Nonetheless, the issue of CPP reform was not mentioned in the NDP government's first budget Tuesday.

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Another twist to the discussion is that the federal Liberal caucus now includes a new MP with extensive pension expertise. Toronto Centre MP Bill Morneau was executive chair of Morneau Shepell until stepping down following his election win. Morneau Shepell is the largest administrator of defined benefit pensions in Canada. Mr. Morneau has publicly advocated for CPP enhancement, but has also rejected commentary claiming there is a pension crisis in Canada.

Canadian Labour Congress president Hassan Yussuff has been urging Ottawa and the provinces for years to act on CPP reform. He notes that Alberta and Ottawa have been the main obstacles to a deal, but new governments in both places have changed the dynamics.

Still, with so many options to choose from and meetings coming up soon, Mr. Yusseff said there is a need to get into the specifics.

"I think a proposal has to be put on the table," he said.

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