Guaranteed Investment Contracts (GICs) in Australia: 2025 Guide

In a world of economic uncertainty, Australian investors are seeking safe harbours for their money. Enter the Guaranteed Investment Contract (GIC)—a low-risk investment option that’s long been popular with institutional investors overseas, but is now gaining traction among superannuation funds and cautious individual investors Down Under. With the Reserve Bank of Australia (RBA) keeping a watchful eye on inflation and interest rates in 2025, understanding GICs could help you decide if they belong in your portfolio.

What is a Guaranteed Investment Contract?

A Guaranteed Investment Contract, or GIC, is a fixed-term investment typically offered by insurance companies. In exchange for locking away your money for a set period—usually between one and ten years—you receive a guaranteed interest rate. At maturity, you’re repaid your principal plus the promised interest. GICs are a staple in North American retirement accounts, but Australian superannuation funds and institutional investors have increasingly used them in recent years as a way to balance risk and return.

• Principal Protection: Your initial investment is guaranteed by the issuer, typically a highly rated insurer.

• Fixed Returns: The interest rate is set at the time of purchase and won’t fluctuate with the market.

• Limited Liquidity: Funds are generally locked in until maturity, with early withdrawal often resulting in penalties or forfeited interest.

GICs in the Australian Context: Policy Updates and Trends for 2025

While GICs are not as widely available to individual investors in Australia as term deposits or bonds, they’re an increasingly popular tool for large super funds looking for stable, predictable returns. In 2025, several trends and policy shifts have influenced their appeal:

• Superannuation Fund Diversification: With APRA’s continued push for portfolio diversification, many funds have integrated GICs alongside traditional fixed income assets.

• Interest Rate Stability: The RBA’s rate holds through early 2025 have made the fixed returns of GICs more attractive compared to variable-rate products.

• Stricter Capital Requirements: Regulatory changes require insurers to maintain higher capital reserves, increasing the safety of GICs but sometimes lowering offered rates.

For example, AustralianSuper’s 2025 annual report highlighted a 12% allocation to GIC-like products in their conservative investment option, citing “capital certainty and yield stability” as key drivers.

GICs vs Term Deposits and Bonds: What’s the Difference?

At first glance, GICs may sound a lot like term deposits or government bonds, but there are crucial differences to consider:

• Issuer: GICs are issued by insurance companies, while term deposits are offered by banks and bonds by governments or corporations.

• Guarantee: GICs are backed by the insurer’s financial strength—not the government guarantee available for term deposits under the Financial Claims Scheme (up to $250,000 per account holder per institution).

• Liquidity: Both GICs and term deposits are generally illiquid, but GICs may have stricter withdrawal penalties.

• Returns: In 2025, GICs offered to super funds typically pay 0.2–0.4% higher annual returns than comparable term deposits, reflecting the slightly higher risk profile of the insurer versus a bank.

For individual investors, direct access to GICs remains limited. However, some managed funds and super options may include GIC exposure as part of their fixed interest allocation. Always check your fund’s product disclosure statement for details.

Are GICs Right for Your Portfolio?

GICs aren’t a one-size-fits-all solution, but they can play a valuable role for investors seeking stability and capital preservation—especially in the context of retirement savings.

• Pros: Predictable returns, principal protection, low correlation with equities, useful for managing portfolio volatility.

• Cons: Limited liquidity, potential credit risk if the insurer fails, generally lower returns than riskier assets.

With market uncertainty likely to continue throughout 2025, GICs offer a way for super funds and cautious investors to weather volatility without sacrificing capital security. If you’re considering this option, weigh the trade-offs and consider how GICs might complement your broader investment strategy.