Why Westpac is selling its $37 billion BT super business

Westpac investors hoping for a windfall when the bank exits its BT pension business are set to be disappointed. The company manages $37 billion in funds, but Westpac will not receive any financial consideration when BT is “handed over” to new ownership.

Regulatory changes that have reduced margins to slippage and increased competition have combined to make BT’s superannuation almost unable to generate a profit on fees after accounting for expenses, according to people familiar with the process.

Westpac announced on Thursday that it will write off the value of BT’s $122 million of pension goodwill to zero after the “carrying value of our pension intangibles has been reviewed and found to be no longer justifiable.” This also includes $45 million of its capitalized software.

Sale of the century. Westpac set to transfer BT super rather than sell it Credit:Peter Rae

Other major banks have sold their retirement businesses for hundreds of millions of dollars in recent years. But these asset sales have included more than just pensions – such as companies such as platforms, administrative or product manufacturing assets.

Industry experts, however, say there are rules around the sale of pure retirement business that do not allow new owners to pay financial consideration. Instead, BT superannuation members would be moved en masse to another fund via what is known as a ‘successor fund transfer’.

The decision of where BT super will land is left in the hands of the trustee, BT Fund Management, who must weigh any deal to transfer the super business against what is in the best interests of the 580,000 members.

The decision would also take into account the performance and fees of the funds that are being tendered for BT’s super business.

The question of whether the trustee could even recoup the expenses associated with transferring the super company to a new owner has recently been the subject of legal proceedings – aimed at providing clarification.

BT Finance Group chief Matt Rady has previously said any costs that may be recovered from the merged fund as a result of the deal would benefit members of the BT super fund and not Westpac.

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