Ottawa's proposals for pension reform renewed a furious debate on the issue Friday.

On Thursday, Finance Minister Jim Flaherty informed his provincial colleagues that he sees the need for major changes and wants their support.

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Finance Minister Jim Flaherty unveiled his pension reform proposals to his provincial counterparts in a letter Thursday.

Flaherty recommended that financial institutions be given the regulatory freedom to provide more pension options at low cost, especially to self-employed people, small businesses and workers not covered by corporate plans.

As well, 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.

Flaherty's plan is in line with the reforms put forward by Ontario Finance Minister Dwight Duncan.

Public consultations this spring convinced Ontario officials of the need for reform, after hearing a resounding message for the province to act.

"This is actually a tremendous breakthrough," said Susan Eng, vice-president for the seniors' lobby group CARP.

"He [Flaherty] felt the heartbeat of Canada on this one," said Ken Georgetti, president of the Canadian Labour Congress. "There are a lot of votes out there on this issue. It's grey power."

Canadian Autoworkers president Ken Lewenza called the proposed changes "encouraging and historic."

Small business opposed

But the Canadian Federation of Independent Business, a small-business lobby, is against changes if they end up increasing the CPP premiums paid by employers.

"I think it's just disgusting," said CFIB president Catherine Swift. "I'm shocked. Really shocked."

Alberta also remains opposed. Provincial Finance Minister Ted Morton called  the federal and Ontario proposals an "overreaction."

Morton said low-income workers would be hurt and higher income earners would get benefits they don't need.

Parliament and two-thirds of the provinces with two-thirds of the population must agree to the changes before they can be made. The changes will be formally discussed when federal and provincial finance ministers meet in Prince Edward Island beginning Sunday.

With files from The Canadian Press