UPDATE 2-Canada and provinces reach preliminary deal on pension plan reform

(Adds background on CPP reform, quote from B.C. finance
minister, details on changes)
By Julie Gordon
VANCOUVER, June 20 (Reuters) - Canada's federal government
and provinces agreed in principle on Monday to support a
compromise plan to expand the national pension plan that would
see premiums raised moderately over time to provide greater
payouts for pensioners.
The proposed changes, if formally approved by the provinces,
would start in 2019 and be phased in over seven years, according
to the plan signed by eight provincial finance ministers and
federal Finance Minister Bill Morneau.
Reforming the Canada Pension Plan, or CPP, requires the
support of the country's federal government plus seven of the 10
provinces, representing two-thirds of the Canadian population.
Like other governments around the world, Canada faces a
challenge to provide for its aging population. The CPP has been
deemed by some experts as insufficient to provide enough income
in retirement without being supplemented by a workplace pension.
Fewer employers are offering workplace pensions and those
that do are reducing the benefits of those plans, prompting
advocates to lobby for CPP reform.
The previous federal Conservative government refused to
consider changes, which prompted Ontario's Liberal government to
come up with its own plan to boost retirement security for
residents in the absence of a national solution.
The election of a federal Liberal government last October
opened the door to new cooperation, although securing the
required backing among provinces proved challenging.
The proposed changes, following a day of talks between
Morneau and his provincial counterparts, are revised from
Ontario's proposal and will now be considered by the provinces.
If approved, a final agreement could be formalized within weeks.
"I think we have reached a balanced approach to satisfying
the objectives that were set out - that is a modest enhancement,
that is fully funded and is affordable," British Columbia
Finance Minister Michael de Jong told reporters.
The agreement means Ontario will likely not go ahead with
its proposed Ontario Retirement Pension Plan.
Quebec, which has its own pension plan, did not sign on but
expressed its support for "modest, targeted and gradual
enhancements." Manitoba is the only other province that did not
sign the deal.
Under the current plan, both employers and employees
contribute 4.95 percent of income up to a C$54,900 ($42,927)
cap. The maximum payout is C$13,110 annually, lower than that of
other wealthy nations.
With the new deal, the earnings cap would rise to C$82,700
by 2025, with the income replacement level increasing to
one-third of the cap.