Mr. Speaker, shortly I will address the amendment before the House, but I first want address the Canada pension plan. We and the provinces have been joint stewards of this plan initiated back in 1997 in terms of the reforms. In the early 1990s, the Chief Actuary of Canada questioned the sustainability of the Canada pension plan. This government, along with its provincial partners, heeded that warning and we now have reforms that of course bring forward a schedule of increases in CPP contribution rates. We are building up a larger asset pool before baby boomers retire. As we know, the fact was that the moneys were not keeping up and the pool would have dried up. Therefore, investing in the markets at arm's length is another important requirement, which we have in this legislation. As well, slowing the growth costs of benefits through administrative and expenditure measures is very important.
Hon. members will recall that a key element of the reform was a new market investment policy for the plan, and the CPP Investment Board was established. Clearly the need existed for an independent organization, and I stress that because it is very important to note the independence of the board.
Prior to 1999 when the Canada Pension Plan Investment Board began operations, the investment policy in place for CPP required that the funds not immediately needed to pay the benefits be invested in provincial government bonds at a federal government interest rate. That policy of course resulted in an undiversified portfolio of securities and an interest rate subsidy to the provinces.
Fortunately, now that we have the CPPIB, we have an investment market policy. Since 1999, the funds that are not immediately required to pay benefits and expenses are transferred to the board and are prudently invested in a diversified portfolio of market securities in the best interests of the contributors and the beneficiaries.
I would point out that we have an all star board of directors, with its members recommended by provincial finance ministers in conjunction with the federal Minister of Finance. They manage prudently, as I have said, billions of dollars on behalf of Canadians. The board is fully accountable to CPP members and to governments through annual reports and material on the website, again making sure that although it is at arm's length from government it is accountable to Parliament and to the very people who benefit from the plan.
It is a market investment policy that is of course consistent with other pension plans. One might think of OMERS, the municipal employees retirement system, or the Ontario teachers' pension plan, which some members are familiar with.
It is important that certain assets have remained with the federal government. These assets included an operating reserve of about $6 billion and a large portfolio mostly made up of provincial government bonds valued around $32 billion. Under Bill C-3 these remaining assets will be transferred over a three year period to the CPPIB. That of course is very important. As I have said, we have an outstanding board made up of investment professionals, people who know how to invest money, and they are doing it in a prudent fashion. That again is important for all members to note.
Here we are developing a more coherent policy in terms of investment, which I think is important for those who will benefit from this plan. A point that must be stressed is that it puts it on the same footing as other public pension plans, providing CPPIB investment managers with the flexibility to determine the appropriate mix of investment strategies for the Canada pension plan, which again I think is important. It is also important to remember that the transfer of the remaining assets over the three year period will help to ensure that the transfer is absorbed smoothly by the capital markets and the CPPIB in terms of the provincial borrowing programs as well.Again, this is extremely important.
The amendment being proposed here has to do with section 37 of the Canada Pension Plan Investment Board Act. The issue is one of the foreign property rule. I will not support the amendment, because in terms of government policy the 30% limit strikes a balance between two important objectives that I think the House should be aware of: ensuring that there is a significant portion of tax assisted retirement savings invested in Canada and providing diversification opportunities for pension plans and RRSP owners. The government is conscious of the need to maintain an appropriate balance. The minister certainly is aware of achieving those objectives and making sure that the impact is appropriate. The foreign property limit was increased from 20% in 1999 to its current 30%.
In fact, I will provide some background history for those members who may not be aware of this. During the initial period of the reforms in 1997, as I have said, expanding the foreign property rule was in fact part of those very discussions. It was a key recommendation from the Senate banking committee from its review of the legislation.
We know that initially in the 1971 budget it was at 10%. Of course what has happened over the years is that we have increased it to 20% and now to 30%. I think that is prudent. I think that makes a lot of sense. Again this is in keeping with government policy. I think it provides the objectives we need in terms of the plan.