Finance Minister Jim Flaherty and his provincial and territorial counterparts have settled on a framework for a new private-sector pension plan for workers, including the self-employed, designed to get more Canadians saving for their retirement years.

Speaking at the close of a finance ministers meeting in Kananaskis, Alta., Monday afternoon, Flaherty said the new plan, called the Pooled Registered Pension Plan, or PRPP, will give millions of workers access to a private pension plan for the first time.

"This new private-sector retirement savings vehicle will improve the range of retirement savings options available to Canadians by providing a low-cost retirement savings opportunity for employees -- with or without a participating employer -- and the self-employed," Flaherty said in a statement.

"PRPPs will be a major breakthrough for the Canadian pension market."

Flaherty said he will continue meeting with provincial and territorial officials and other stakeholders to hammer out the details for PRPPs, which he called "a really important savings plan."

"We all agreed we want Canadians to save more, and in particular we want all Canadians to save more for their retirement income."

The agreement means provinces such as Ontario, which had expressed reservations that a private plan may delay reforms of the Canada Pension Plan, were convinced of its benefits. And Flaherty assured his provincial and territorial counterparts, as well as the gathered media, that CPP reform is not off the table.

Flaherty said the ministers agreed to continue reviewing potential changes to CPP and would discuss various options and concerns at their meeting in June.

Several months ago, Flaherty seemed prepared to respond to the call by Ontario and other provinces to boost CPP premiums and shore up the plan. However, in recent weeks he has talked up the private-sector option, seemingly uninterested in asking employers and employees to cope with higher CPP premiums as the economy slowly emerges from a recession.

"We are all concerned about a fragile economic recovery. We want to make sure that jobs continue to grow in Canada, and so there is concern about not putting more burdens on employers right now," Flaherty told reporters after Monday's meeting. "Having said that, we also agree that we want to continue the work on the CPP ideas and we agreed that we would do that."

Before the meeting, Quebec Finance Minister Raymond Bachand said he agreed that now is not the time to expand CPP and hike premiums. But he said eventually such a move will be necessary.

"You make these decisions once a generation. You can take another nine months to study it closely," said Bachand.

Power Play host Don Martin said Monday the private-sector plan is viewed as desirable to some because investors would "presumably get better returns on their investment."

"Obviously it's not as desirable as the CPP, which is backed by the government that can print unlimited amounts of money," Martin said. "So obviously people who want security and depend on their money to be backed by government will obviously want the CPP enhanced rather than some sort of private sector alternative."

Balanced budgets

While the ministers discussed the need for Canadians to be saving more for retirement, they also agreed to get their own financial houses in shape by balancing their budgets "in the medium term," according to Flaherty.

While he conceded that the definition of medium term is flexible, and admitted that Ontario's whopping $18.7 billion deficit means the province will likely take longer than others to balance its books, Flaherty said virtually all provinces will have balanced budgets by 2015.

While the Canadian economy has exhibited some encouraging signs of growth and recovery, "ministers agreed that the situation remains fragile, with concern over mounting public debt in many countries and its implication for long-term growth," Flaherty said.

"We agreed on the need to move decisively to get back to sustainable budget balance."

Flaherty also assured the provinces and territories that the federal government won't be cutting transfer or equalization payments in an effort to attack its own budget deficit.

Flaherty said transfer payments will remain at their current levels of growth -- six per cent for the Canada Health Transfer, three per cent for the Canada Social transfer -- into 2014.

According to Flaherty:

  • transfer payments for 2011-2012 will hit an all-time high of $56 billion, up $2.2 billion from the previous fiscal year
  • the Canada Health Transfer will reach $27 billion, an increase of $1.5 billion
  • the Canada Social Transfer will reach $11.5 billion, which is up $335 million
  • equalization payments will total $14.7 billion for 2011-12, up $287 million
  • territorial Formula Financing will grow to $2.9 billion, up $212 million

With files from The Canadian Press