(February 28 – 1600 ET) In response to intense lobbying, the federal budget proposes to increase the foreign content for RRSPs, RRIFs and registered pension plans to 25% in calendar 2000 from the current 20%. In 2001 and the years following, the foreign content limit will be 30%.

LSIFs

Clients buying labour-sponsored funds will also benefit from the increased foreign content limit. Last year, investors using their deferred income plans to invest in small businesses operating in Canada were able to boost their foreign content. For every $1 invested in an LSIF, they acquired an extra $3 in foreign property room.

However, the ceiling for foreign content was 40%.Under the budget proposal, the ceiling will increase to 45% in 2000 and 50% thereafter.

Seg funds

Segregated funds remain untouched by foreign content limits – at least until
2002. To give insurance companies time to develop systems to monitor foreign
content, the feds are delaying the January 2001 date for bringing seg funds
under foreign property rules. The rule will kick in “after 2001,” according
to the budget.

That means clients intent on having 100% foreign content can achieve that
goal by buying seg funds – and shouldering the higher costs.

The mutual fund industry has been pushing for an even playing field for
mutual funds and seg funds, requesting that Ottawa apply foreign content
rules to seg funds. The federal government first announced the application of
the foreign content rules to seg funds Jan. 1, 1998. This makes the third
time the government has delayed its implementation.
– IE Staff