Canada’s two professional associations representing pension plan administrators and pension fund chief investment officers have called on the federal government to eliminate the 30% Foreign Property Rule in its upcoming budget.

The Association of Canadian Pension Management and the Pension Investment Association of Canada today released the results of a study by University of Western Ontario economists David Burgess and Joel Fried, titled “The Foreign Property Rule: A Cost-Benefit Analysis”.

The study concludes that raising the FPR limit from 10% to 30% between 1990 and 2001 has been highly beneficial to Canadians. Burgess and Fried estimate that moving from 20% to 30% during 2000 and 2001 may have added as much as $1 billion annually to the value of Canadian retirement related savings. The increased diversification of these savings has also reduced their risk.

The study also says that elimination of the FPR would provide Canadians with further diversification benefits amounting to between $1.5 and $3 billion per year.

The authors note that increasing the FPR limit from 10% to 30% had no measurable impact on either the Canada/U.S. exchange rate. Complete elimination is unlikely to have any exchange rate impact.

The study argues that the FPR hinders Canada Pension Plan reform by requiring that most of the accumulating financial reserves be invested in the same economy that the CPP relies on for its future contributions. It calls this a classic case of “double jeopardy” that could be addressed though the elimination of the FPR.

“We believe that the current short, medium and long-term economic environments are supportive for eliminating the FPR,” declared Keith Ambachtsheer, Ppesident of the ACPM.

Russell Hiscock, chairman of PIAC’s government relations committee, said the study “Shows that the complete elimination of the FPR would bring further benefits to millions of Canadians without imposing material costs on any constituency.”

The complete Burgess-Fried paper is available at www.acpm.com or www.piacweb.org.