As previously announced in March’s federal budget, the Liberal government has launched a consultation on whether it should keep, relax or scrap the “30-per-cent rule,” which currently restricts the percentage of voting shares federally regulated pension plans are permitted to hold in a company.
The public consultations, which were announced Friday, will also seek views on the tax-policy issues associated with the growth of active investments by pension plans. The finance department said in a news release that federally regulated pension plans should be able to adapt to a changing world.
Read: Budget 2016: Government to consult on 30% rule
“Canadian pension funds are now among the world’s most trusted and active institutional investors,” said the news release. “As these funds have sought new investment opportunities in recent years, there has been an increase in holdings of corporate interests in which some pension plans play an active management role.”
The government added that the rule was originally implemented to limit pension plans to a more passive role and to reduce the risk of exposure.
It also noted that, internationally, the majority of pension investments are not subject to an ownership concentration limit. In fact, according to the Organization for Economic Co-operation and Development, out of the seven member countries whose institutions hold 90 per cent of pension assets, Canada is the only country with an ownership concentration limit.
Read: Government’s plan to eliminate 30% rule should concern everyone
In March, Ontario announced it intends to eliminate the 30-per-cent rule. Mark Firman, a partner in McCarthy Tétrault LLP’s pension, benefits and executive compensation group, said he agreed with the move, but that the manner in which the provincial government was proposing to eliminate the rule should concern everyone.
“Let’s eliminate the rule but let’s do so in a way that doesn’t make the benefits of elimination illusory,” he wrote in a column for Benefits Canada. “Let’s not lose sight of the act’s existing protections.”
The public consultation at the federal level is open until September 16. Read the full consultation document.
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