Thank you, Mr. Chair.
Good morning.
PMAC is very pleased to offer our recommendations today on behalf of our 270 investment firm members, who collectively manage over $1.8 trillion in assets for pension plans, foundations, endowments, and individual and group RRSPs across Canada.
We want to talk to you today about investment pooled funds, why they matter to so many Canadians, and concerns we have with the tax rules that are impacting their competitiveness and eroding retirement savings.
According to a 2017 Strategic Insight report, Canadians have over $65 billion invested in pooled funds. The majority of these are available through employer sponsored defined contribution pension plans. Pooled funds are very similar to mutual funds, but are less known because they are offered via prospectus exemptions under the securities law to advisers and various retirement and other savings vehicles.
Pooled funds offer Canadians access to diverse asset classes on a very cost-effective basis because they can realize economies of scale through pooling investments and sharing costs. Lower costs mean higher investment returns for Canadians.
Our recommendations today will achieve three important objectives. First, they will correct certain tax policy inequities impacting pooled funds relative to the tax treatment of mutual funds and insurance investment products. This will ensure they remain attractive and low-cost for small businesses that offer retirement savings options for their employees, and ultimately will result in less erosion of retirement nest eggs for average Canadians. Second, they will modernize specific tax rules which will allow Canadians and their investment managers to invest their retirement savings in international emerging markets. Third, they will increase the competitiveness of the asset management industry to attract investment capital from international pension plans and investors.
Canadian tax policy is out of line with international tax rules. It's eroding the talent pool in Canada and the investment profits offered in the industry. Changes desperately need to be made to a number of complex, out-of-date tax rules that have not kept pace with their international counterparts nor with the evolution occurring in the funds industry.
Now I'd like to pass it over to Theo Heldman, who chairs our tax committee and is head of tax at Invesco Canada, to discuss the details.