Canadian retirement savings plans and the Foreign Property Rule

This paper argues that the Foreign Property Rule (FPR), which limits the fo reign content of a registered savings plan to no more than 20 percent of bo ok value, should be removed as quickly as possible. Given the globalization of financial markets, the FPR does not protect what it is meant to protect - a pool of savings for investment in Canada. Instead, it distorts the all ocation of credit among firms, and forces agents to use more costly instrum ents - derivatives - to achieve desired foreign risk exposure. Since the FP R lowers the return on registered savings without benefiting any identifiab le group, removing it would be an unequivocal gain to Canadians.