Bipartisan support for CCIV and RIC praised by FSC

A Senate inquiry report has confirmed bipartisan support for the corporate collective investment vehicle (CCIV) and the retirement income covenant (RIC).

Commenting on these developments, the Financial Services Council (FSC) issued a statement commending the Senate committee’s support for these measures.

“The FSC welcomes the recommendation by the Senate Committee that the Bill implementing the Covenant and CCIV be passed ‘as soon as practicable’ to provide certainty to the industry and stakeholders,” said FSC acting chief executive Blake Briggs.

The FSC has long supported the CCIV, arguing that it would underpin major export opportunities for the Australian funds management industry and help the financial services industry contribute to Australia’s post-COVID recovery.

“The CCIV should help address an export gap for Australia, with foreign capital currently only 5 per cent of investment into Australian managed funds,” Mr Briggs said.

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, Mr Briggs voiced the FSC’s strong support for the retirement income covenant, which will require 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.

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.”

The covenant, set to come into effect on 1 July 2022, has been widely praised by industry groups including the former Financial Services Council CEO Sally Loane who called it a “milestone” for financial services and the Council on the Ageing (COTA) Australia.