CCIV and RIC sail through Parliament

Following bipartisan support, legislation to implement a corporate collective investment vehicle (CCIV) and the retirement income covenant (RIC) passed into law on Thursday (10 February). 

“This is a historic day for financial services, with the passage of two vital reforms that have been long-supported by the FSC: the CCIV and the covenant,” said acting chief executive of the Financial Services Council (FSC), Blake Briggs.

The FSC has been a strong advocate for the introduction of the CCIV, believing it was key to opening up new export opportunities for Australia’s funds management industry.

“We have one of the largest funds industries in the world, but regulatory settings have discouraged us from using this strong base to export our expertise to the rest of the world,” said Mr Briggs. 

“Only 5 percent of the funds managed in Australia comes from offshore ($145bn out of $2.6 trn), showing the significant scope for Australia to build on our existing strengths to export this to the globe.”

The CCIV regime will permit fund managers to use a company structure with flow-through tax treatment – this will be more familiar to international investors who are more used to corporate investment structures.

On the retirement front, the retirement income covenant has been praised for creating an obligation on superannuation funds to develop a retirement income strategy for fund members who are retired or nearing retirement.

“The retirement income covenant will help a growing proportion of Australians plan with certainty as they move into their retirement,” Mr Briggs said.

The CCIV and covenant both start operation from 1 July 2022.

Last month, Challenger Life’s general manager of retail distribution, Luke Cheetham, said on an episode of the ifa Show that the retirement income covenant will present a huge opportunity for financial advisers.

“We work in a highly complex retirement system and you couple that with a lack of understanding of the risk that many will face over a 20 to 30 year retirement, it really means that transitioning from work to retirement without the right guidance [and] without the right advice can be a really daunting prospect for many,” Mr Cheetham said.

“So I do feel that there’s great potential for product manufacturers and the advice market to work together and help make sense of retirement to give people the confidence that they need, when it comes to managing their savings.”