Thank you, Mr. Chair.
We are pleased to have the opportunity to make a presentation to the committee today.
My name is Katie Walmsley and I am the president of the Portfolio Management Association of Canada, formerly known by the acronym ICAC. I am accompanied today by Scott Mahaffy, who is the vice-president (legal) of MFS McLean Budden and who serves as chair of our industry regulation and tax committee.
If you have any questions after the presentation, Scott or I will be happy to comment.
PMAC is composed of over 170 investment firms from across Canada that manage investment portfolios for pension plans, foundations, endowments, and individual Canadians who are saving for retirement. Our total assets under management are over $800 billion and close to $1 trillion, if including mutual fund assets.
Given that much of these assets are in the form of pension or retirement savings, our recommendations today will centre on measures to help Canadians protect, preserve, and grow their capital to ensure they have adequate savings for a comfortable retirement.
I'd like to start by applauding the government for two initiatives that, when implemented, will go a long way to help Canadians grow and protect their savings: first, the introduction of the pooled register pension plans; and second, the pursuit of one common securities regulator.
First, let's start with the common regulator. Why do Canadians need one? What's wrong with the current, fragmented, costly system? According to the recently released 2012 CSA Investor Index, 27% of Canadians believe they have been approached with a fraudulent investment opportunity at some point in their lives, yet among this number, only 29% have reported this to the authorities.
The establishment of one common securities regulator will help improve investor protection against fraud and will ultimately increase investor confidence in the capital markets. We believe the December 2011 Supreme Court ruling suggested that the next step forward is for the government to develop constitutionally sound legislation that supports streamlined securities legislation in Canada. We truly believe that a common securities regulator is in the best interests of Canadians. We therefore recommend that the federal government extend the budget of the Canadian Securities Transition Office for at least another fiscal year to allow them to continue their work, and to work with the provinces cooperatively to make this objective a reality.
Second, we applaud the government for the recent introduction of the pooled registered pension plans. This is a very positive step forward, filling a gap for many Canadians who do not have traditional pension plans. We encourage the government to continue to work with their provincial counterparts to expand the use of PRPPs across Canada. However, given the likelihood that many provinces will not make PRPPs mandatory, we recommend that the federal government introduce specific tax incentives for employers to set up PRPPs or other retirement savings vehicles. Details of these incentives are outlined in our formal submission, but we believe these incentives will help kickstart PRPPs and make them a success.
What other initiatives would help Canadians save for their retirement? For starters, let's look at the tax they're paying for the professional management of retirement savings. There's a value-added tax principle that tax should be paid at the time of consumption. It's very logical. What doesn't make sense to us is why individual Canadians and pension plans must pay GST and then harmonize provinces' HST for the professional management of their retirement savings. They are, in effect, paying tax twice. When HST came into effect in Ontario and Nova Scotia, as examples, the pension plans in those provinces had to pay an additional tax—8% in Ontario and 10% in Nova Scotia—on the management fees. As you are all well aware, pension plans are already struggling with unfunded liabilities. The government has struck a committee that is looking at the taxation of financial services, and in light of the issue and the priority that government has given to retirement savings, we urge them to look holistically at a solution that would simplify the tax for retirement savings and ease the burden for Canadians.
We have one final suggestion. Canadians are encouraged to take the opportunity to invest globally. The government is also making international trade a priority. Many of the emerging markets, however, are not open to ordinary Canadians. On the list of designated stock exchanges, 40% are within North America, 40% are in Europe, and only three are in emerging markets.
The current list does not provide adequate risk diversification and optimum asset allocation and is completely out of date. We urge the government to both update the list and to streamline the process of keeping the exchanges current.
Thank you. Merci.