Westpac (ASX: WBC) subsidiaries BT Funds Management and Westpac Life Insurance Services have been hit with a class action from law firm Slater and Gordon (ASX: SGH).
The class action alleges that superannuation members were short-changed by the bank's super funds.
Slater and Gordon says members who invested in the BT Super for Life cash-only option were snubbed when they invested through Westpac Life and allowing it to earn substantial fees for providing no valuable service.
It is alleged that rather than investing member funds directly, BT chose to use Westpac Life as an intermediary, who then invested the money in an externally managed cash fund.
The firm claims that Westpac Life was given complete discretion about the interest rates it would pass onto members, and at times kept almost half of the returns on members' money for itself.
Slater and Gordon special counsel Nathan Rapoport says members have potentially lost out on thousands of dollars over a number of years.
"Superannuation members trusted BT with their retirement savings, but instead of seeking the best returns available for members, it appears BT chose to line the pockets of another entity in the Westpac group at the expense of its members," says Rapoport.
"In recent years Westpac Life actually achieved reasonable returns on members' money, but the arrangement meant that it kept much of that benefit for itself. One year, Westpac Life earned returns of around 2.5 per cent, but it delivered an interest rate of only 1.3 per cent to members.
"We believe Westpac Life provided no service that could justify it retaining such a large part of the returns generated from members' money, and we want the difference paid back to members."
Westpac says in a short statement to the ASX that it is defending the claims.
The class action is funded by Therium Capital Management and is part of Slater and Gordon's 'Get Your Super Back' campaign.
Shares in Westpac are up 0.39 per cent to $28.60 per share at 10.42am AEST.
Business News Australia