The retirement savings reform debate in Canada has overlooked the significant impact of taxes on Canadians’ savings, according to the Portfolio Management Association of Canada, formerly called the Investment Counsel Association of Canada.

The association, which announced its rebranding at its annual general meeting in Toronto on Wednesday, unveiled a new campaign in which it is calling for more synchronized efforts towards reform of the retirement savings system.

“We’re really calling on the federal and provincial governments to synchronize their efforts on pension reform,” said Katie Walmsley, president of PMAC, speaking to members of the media at the meeting.

PMAC is encouraging a national, synchronized expansion of the retirement savings regime, to include solutions for Canadians who are self employed or working in an industry without a formal pension plan.

Walmsley acknowledged that many strong recommendations have been made in the pension reform realm, through expert panels and research studies. In particular, she commended efforts made in Alberta, British Columbia, Ontario and Nova Scotia.

But she said this patchwork approach is ineffective. PMAC is calling for a broader, higher level look at all of the legislation and rules which have an impact on Canadians’ ability to save, including tax legislation.

“The income tax impacts are being overlooked,” Walmsley said. In particular, she said there hasn’t been enough focus on the negative impact of the Harmonized Sales Tax – introduced in Ontario and British Columbia this year – on Canadians’ retirement savings, through its increase in the investment management fees that investors pay.

This consumption tax is at odds with wealth accumulation and retirement savings, hindering and negating the purpose saving – especially for investors who seek out advice, according to the PMAC.

Walmsley noted that in some cases, the tax portion of fund management fees have doubled as a result of the HST.

“That’s significant,” she said. “Why has there been not more of an outcry?”

One reason that investors haven’t been more vocal about the impacts of the HST is that they don’t realize the effect it has on their savings in investment funds, Walmsley said.

“The actual tax impact is not necessarily transparent and clear.”

This lack of transparency extends to pension plans, whose members likely don’t realize that the cost of their employer pension plan has increased as a result of the HST, according to Walmsley.

While PMAC is supportive of tax harmonization, it calls for a rollback on the HST as it relates to investment management fees. The federal and provincial governments should be looking for ways to encourage savings, “such that there’s a tax at the time of consumption, but not when Canadians are trying to save,” Walmsley said.

New identity

The launch of PMAC’s new identity is part of an effort to better reflect the broad membership of the association, according to Walmsley. She pointed out that the association’s members include managers of private client assets, mutual fund assets and institutional assets.

“The reality is, our membership is broad,” she said. “It’s to signify our growth, and the breadth of our membership.”

The name change also reflects the disappearance of the term ‘investment counsel’ under regulatory registration system, Walmsley said.

IE