Mr. Chair, thank you very much for the opportunity to present today.
The Portfolio Management Association of Canada represents over 240 investment management firms from across Canada that collectively manage over $1.6 trillion for Canadians, much of which is pension plans and group and individual RRSPs.
We've presented to this committee frequently over the years, and our recommendations typically are focused on retirement savings and ensuring fair tax treatment of retirement savings, which are typically tax exempt, with the overriding principle that Canadians deserve increased access to low-cost investment opportunities and fairness to help grow their pensions and RRSPs.
Segregated funds are insurance products very similar to mutual funds, but produced by insurance companies that provide returns based on a segregated pool of assets. According to a 2017 report by Strategic Insight, Canadians invest $117 billion in segregated funds. We were very pleased that federal budget 2017 extended the tax-deferred merger rules to segregated funds, which allowed for these funds to merge and gain efficiencies, when appropriate, without negative tax consequences to Canadians holding these hybrid insurance and retirement savings vehicles.
We are here today because there was a bit of an oversight in the budget, we believe, and we would like to request that these rules be extended to prospectus-exempt pooled funds. As you know, most Canadians working for companies typically have one of three types of retirement savings plans. There's a traditional defined benefit plan, which is not growing. The more common types nowadays are defined contribution plans and group RRSPs.
Defined contribution pension plans and group RRSPs frequently invest in pooled funds, as they are much lower cost than traditional retail mutual funds and provide the asset mix diversity needed for Canadians to save for their retirements. Pooled investment vehicles offer Canadians, particularly the middle class, with access to various asset classes on a cost-effective basis, given the ability to find economies of scale by pooling investments and sharing costs.
Unless the investment merger rules are extended beyond segregated funds to the underlying pooled funds that they invest in, a merger at the segregated fund level will be impacted by the tax consequences of the mergers of the underlying pooled funds. This would result in lower investment returns for the average Canadian with an employer-sponsored defined contribution pension plan.
My colleague, Eric Adelson, will now provide more detail and a specific example.