Westpac raises $ 220 million windfall with BT funds

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“Too many for-profit pension funds seem to have put their business owners ahead of the moms and dads who are their members,” Dr. Leigh said. The Australian Financial Review.

“BT underperformed other superannuation funds, but Westpac kept withdrawing money to boost profits. “

BT-branded funds have been identified as a chronic underperformance over the same time frame in the Australian Prudential Regulation Authority’s heat map assessments and in analyst Stockspot’s annual Fat Cat Funds report.

The group’s three default MySuper products – BT Super, Westpac Group Plan and Asgard Employee – are expected to be labeled underperforming in September after the results of APRA’s first annual performance test were released. The test is a key feature of the Morrison government’s controversial reforms, Your Future, Your Super (YFYS).

These products generated returns more than 50 basis points below their respective six-year net returns, while the 0.5% administration fee charged on BT Super and Asgard Employee products exceeds the industry median, according to APRA map data.

If they are officially designated as “underperforming,” BT would be required to refer all affected members to the government’s new YourSuper comparison tool to help them find a better fund.

Such a move could speed up releases of BT’s MySuper products, which are already bleeding member accounts at a rate of nearly 10% per year, according to APRA.

A continued exodus could weigh on the sale process of BT’s retirement business, which Westpac put up for sale in May last year alongside its insurance and wealth management platform assets.

“Main engine for decisions”

However, a Westpac spokesperson pointed to BT’s MySuper Lifestage funds, which she said have performed strongly over one, three and five years.

The so-called Lifestage funds for members born in the 1970s, 80s, 90s and 2000s returned between 23.7% and 24.1% for the 12 months through May 31, 2021, the spokesperson said.

The MySuper 1980s BT Lifestage investment option returned 26.1% for the 12 months through April 30, 2021, placing it in the top 10 funds over three years, according to researcher Rainmaker.

“We expect equally strong results for the year ending June 30, 2021, once available this week,” she added.

“The interests of the members are the main driver of decisions about the fund. BT discloses all dividends paid to Westpac in its annual reports which are available to the public. “

But the regulator admitted that profits paid to related parties by super trustees are a potential blind spot.

A letter from APRA Vice President Helen Rowell to Dr Leigh last month, seen by the Financial analysis, said that while the watchdog expected directors to consider a “range of factors” when determining profit distributions, it had no specific control over the practice.

“APRA’s data collection does not currently collect specific information on the proportion of money paid that ends up in profit,” Ms. Rowell wrote.

As part of its impending pension data transformation project, APRA will be able to capture “profit classification” as a subset of expenses to be reported by super funds starting in September. of this year.

Matthew Linden, deputy head of Industry Super Australia, a lobbyist for 15 funds in the $ 800 billion nonprofit super sector, said dividend payments should be a factor for companies to meet their new debt obligation. ” act in the best financial interest of members under the YFYS laws.

Dividend and profit payments have been “excluded” from the methodology, Mr. Linden said, allowing “poorly performing for-profit funds to continue to extract up to $ 10 billion a year from their members.”

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