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Canadian RRSP Investors: Demand Passage of RRSP/RRIF Legislation


Canadian RRSP Investors: Demand Passage of RRSP/RRIF Legislation

Contributed by: martingale

Commentary The recent budget proposal to eliminate the RRSP foreign content limit is in trouble: Bill C-43 may die on the order paper. Bill C-43 is the enabling legislation that implements the key budget proposals that every party in the Commons had previously agreed to. This includes the removal of the foreign content restriction on RRSP/RRIFs, as well as the increases in the amount you can contribute tax-free. If the Opposition defeats the Liberal minority government before Bill C-43 becomes law it will be a terrible shame. Whatever your political stripes, please contact the Conservative Party, the Federal NDP party, and (for Quebec residents) the Bloc Quebecois and urge them to pass Bill C-43 before they force another federal election. You might also make some progress by contacting the local riding associations in your area--you can find them on the party websites. No matter who you would vote for you have a direct, financial, real money-in-pocket vested interest in seeing Bill C-43 passed before there is an election.

This is a non-partisan appeal to all Canadians, regardless of which party you would choose to support in the next election: Contact your party and demand that Bill C-43 be passed before Parliament is dissolved.

The elimination of the RRSP foreign content limit can only be good for Canadians. The freedom to choose investments anywhere on the planet will benefit you in two ways:

  • You will have access to cheaper and better exchange traded funds on the US stock market.
  • Competition with cheaper, better US products will force Canadian vendors to lower their prices and improve their services.
So, no matter whether you planned to increase your foreign content holdings or not the change will directly and immediately benefit you.

Bill C-43 has passed second reading, and been sent to the Finance Committee for alteration. It must then pass a third reading, pass a vote in the Senate, and receive Royal Assent. There's not much left to do to get it passed--this bill could be passed and we could still have a spring election. Let your local politicians know that this is what you want.

The Canadian economy represents only a small fraction of global investment opportunities: We represent only 2-3% of the worlds financial markets. As a general rule, you should allocate your investments roughly in proportion with overall market cap. That would imply that you should hold no more than 2-3% Canadian investments. However, it's cheaper to invest closer to home, and so a prudent investor might hold up to 10% Canadian for this reason alone.

A further factor is dollar exposure: An investor ought to maintain a sizeable portion of their portfolio in the currency they plan to spend in retirement. For this reason it is prudent for most investors to hold a sizeable amount of their overall net worth in Canadian dollars. However, those dollars should probably be in bonds. The equity portion of your portfolio ought to be fully globalized--with perhaps no more than 10% Canadian investments.

Again, even if you disagree with this reasoning, even if you feel you will still hold the majority of your equities in the Canadian stock market, it is still in your advantage to have fund vendors here in Canada compete directly with foreign firms: Prices in Canada are obscenely high, and this change will bring the good service and lower prices enjoyed by American investors to everyone in Canada--even those who choose to "stay home".

It is important that you act now: Send a strong message to the Conservative party especially that you want to see Bill C-43 passed before they force a federal election.

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Canadian RRSP Investors: Demand Passage of RRSP/RRIF Legislation
Authored by: Kassman on Sunday, April 17 2005 @ 07:12 PM EDT
I'm with you Martin....pass the legislation! The liting of the foreign limit helps us at both ends--potentially greater returns and lower investment costs. Get it done.
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