Canada removes cap on foreign property investment

Announcing the budget, minister of finance Ralph Goodale said the government would scrap the 30% foreign property investment cap on pension and registered retirement savings plans (RRSPs) and increase the contribution limits on RRSPs to CAN$22,000 by 2009 and 2010 respectively.

RRSPs and pension plans have been subject to the 30% foreign property limit since 2001 with the aim of keeping funds flowing into domestic capital markets.

The move means Canadians will be free to invest unlimited amounts of their savings in overseas markets.

Goodale said: “T o expand the investing universe for Canadians and offer them the potential to achieve greater diversification and a more secure future, we will remove the foreign property limit – effective immediately.”

In its budget, the government said Canadian markets had grown and matured and no longer required the protection of the cap.

The government said lifting the contribution ceiling – from CAN$16,500 a year in 2005 to CAN$22,000 in 2009 – would be of particular benefit to entrepreneurs, the self-employed and small business owners.

Canada’s retirement income system is based on three pillars – the state funded first pillar, the Canada Pension Plan and Quebec Pension Plan, both funded through payroll contributions, and private tax-assisted retirement savings in RRSPs and registered pension plans (RPPs).

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