Westpac simplifies its portfolio with super merger

  • By Zilla Efrat

Westpac and its subsidiary, BT Funds Management, have signed an agreement to merge BT’s personal and corporate superannuation funds with Mercer Super Trust – a move that will create a $65 billion super fund with 850,000 members.

The super funds involved had total funds under administration of $37.8 billion at the end of March 2022 and include the Westpac employee default plan (Westpac Group Super Plan).

BT employees who support these funds will be offered employment by Mercer, a retirement and investment specialist whose multi-manager funds manage more than A$500 billion in assets globally.

The merger does not include superannuation held on Westpac’s BT Panorama and Asgard platforms.

Meanwhile, Westpac has also entered into an agreement to sell its Advance Asset Management business (Advance) to Mercer Australia. Advance, a multi-manager investment business, had $43.7 billion funds under management at end of March 2022 and manages a number of products available through BT Panorama.

“This is a further step in the simplification of Westpac and supports the group’s focus on banking in Australia and New Zealand,” says Westpac specialist businesses CEO Jason Yetton.

“It also provides significant benefits for BT Super members, new opportunities for our people and redefines the landscape of superannuation in Australia.

“Since the formation of Westpac’s specialist businesses division around two years ago, we have made significant headway on our portfolio simplification agenda, having announced eight business sales, of which five have now completed.”

The merger will be facilitated through a successor fund transfer (SFT), which will result in a small loss as a result of transaction and separation costs. The sale of Advance will result in a gain.

The net effect of both over the remainder of the 2022 and 2023 financial years is expected to be an after-tax gain of $225 million. An after-tax write-down of capitalised software and goodwill in the superannuation business and some transaction costs were booked in the first half of 2022.

Separation and transactions costs of approximately $80 million (after-tax) are expected to be expensed in second half of 2022 and treated as a notable item.

On completion, the merger and sale are expected to deliver an increase of approximately 8 basis points in Westpac’s common equity tier one capital ratio.

BT Super Trustee – Member benefits trustee chair, Gai McGrath expects the merger to create a larger superannuation fund with the potential to deliver improved performance, lower fees, and broader member services.

“It also maintains continuity of knowledge and service for BT Super members,” she says.

The merger of the BT personal and corporate superannuation funds and the sale of Advance remain subject to certain conditions and regulatory approvals and are expected to be completed in the first half of 2023.