(May 14, 2004) Pension fund managers might get their wish as federal Finance Minister Ralph Goodale says he will review the budget item that restricted pension participation in the income trust sector.

When Goodale tabled the budget in March, it prohibited pensions from holding more than 1% of their assets in income trusts. Pensions were also barred from holding a stake greater than 5% of any single trust. Breach of either restriction would result in a penalty of 1% per month.

A report in the Globe and Mail quotes Goodale as saying his department will now revisit the decision, accepting consultation from the investment community.

“Having now seen the variation in views that range from those who are very much in favour to those who are very much opposed, I think I need to give an opportunity for all of that to be vented at this stage,” Goodale said.

The restrictions did not apply to real estate investment trusts or energy royalty trusts, as many pensions have been holding these investments for years.

While many pension funds had been leery of investing in income trusts, apparently waiting for legislation to limit owner’s liability, others have been very active.

The Ontario Teachers’ Pension Plan has been one of the biggest players in trusts, with its notable participation in the largest trust offering ever, Yellow Pages. Teachers’ was one of the more vocal funds to oppose to the restrictions, which, as a tax measure, went into force immediately.

R elated Stories

  • Income trusts capped in a housekeeping budget
  • Questions raised over possible trust loophole
  • Institutional investors already in trust market
  • Pension fund protests became even louder in April, when it was pointed out that the Quebec public pension program, the powerful Caisse de dépôt et placement might be exempt from the restrictions, because it is structured as a Crown corporation.

    Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

    (05/14/04)