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Ontario has fired a shot across Ottawa's bow: Address Canada's impending retirement crisis, or the province will take action itself. The question is whether Ottawa will feel compelled to take up the challenge.

The Globe and Mail's Adam Radwanski, citing government sources, reported that the Ontario government is considering creating its own mandatory pension plan in addition to the federal government's national Canada Pension Plan, unless Ottawa and the provinces can agree to enhance the CPP. Critics say the existing federal plan, which pays a maximum of $12,000 a year to retirees (but on average only $7,000), isn't nearly adequate to provide financial security to Canada's pensioners.

This comes as Prince Edward Island has been pushing a plan to double the CPP's maximum contributions and maximum payouts – a proposal that was praised by Ontario's finance minister, Charles Sousa. With the federal and provincial finance ministers scheduled to meet in December to discuss pension changes, it now looks like Canada's biggest province is not only throwing its heft behind ramping up the CPP, but is prepared to raise the stakes.

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Not that the stakes aren't considerable anyway. As I noted in a recent ROB Insight column, Canada's retirement-age population is projected to double over the next 25 years, and far too many of these soon-to-be seniors have neither the company pensions nor the personal savings to adequately support themselves in retirement. It's a serious worry that could fester into a full-blown national social and economic crisis, unless action is taken.

And there are practical reasons for the provinces to be leading the push. Social services are a provincial jurisdiction. If, a couple of decades from now, a large population of baby-boomer seniors is in need of government support, it's the provinces that will be on the hook.

In Ontario, where balanced budgets are elusive at the best of times, this is a daunting prospect. Community and Social Services accounts for about $10-billion of the province's 2013-2014 budget, the vast bulk of which goes to social assistance. That's up 14 per cent in the past three years alone. Its costs are growing faster than health care.

This might just be an elaborate bluff by Ontario – leaking the possibility informally now as a means to both test public sentiment and put pressure on Ottawa. After all, government pensions have historically been Ottawa's purview. As reluctant as the Harper government is to raise contributions for both workers and their employers in still-uncertain economic times (not to mention that many would perceive it as a de facto tax increase), it might be even more reluctant to start ceding oversight of the pension system to the provinces. Maybe the mere threat that Ontario would go its own way would shake Ottawa out of its slumber and create serious momentum on CPP reforms.

On the other hand, it's not like there's no precedent. Quebec has opted out of the CPP entirely, running its own provincial plan instead. (Saskatchewan also has its own plan on top of the CPP, but it is a voluntary plan.) And Ontario (as far as we know) isn't talking about going the route of Quebec, which, given Ontario's size, would pose a serious threat to the stability of the CPP. If Ontario wants to give its citizens some extra security without disrupting the existing CPP, and risk the wrath of voters, Ottawa might just let it.

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