Canadian Pension Plan's Foreign Investment Limit Lifted

February 24, 2005 ( - The Canadian government has erased the limit on foreign investment in pension plans and registered retirement savings plans (RRSP) as part of the federal budget.

>The Foreign Property Rule has been on the books since 1971, when the government – in an effort to stimulate the domestic economy – limited foreign investment to 10% of assets. The limit was eventually raised to 30%, but on Wednesday, with the release of the budget, it disappeared altogether, according to the Canadian Press (CP).

>The government, with the new budget, also raised the maximum contribution levels to RRSPs. The current limit is $16,500 annually; the new limit will be $19,000 in 2007, and will increase by $1,000 every year until 2010. After this, the levels will be indexed to the average wage growth, the CP reports.

“This proposal responds to the growing retirement income needs of Canada’s aging population and the requirements of pension funds, in particular large funds, by allowing broader international diversification opportunities for retirement investment,” says a budget document, according to the CP.

>Multiple groups – including the TD Bank – had been pressuring the government to make the move. They have cited the need to allow investors more opportunity, as well as relieve pressure on the rising dollar. Diversity has also been cited as a major cause for the move.