Westpac confirmed it has received a class action filed against BT Funds Management and Westpac Life Insurance Services in relation to BT's Super for Life cash investment option.
Slater & Gordon filed the action on behalf of Tracey Ghee.
Westpac said in a statement: "The damages sought by the claim are unspecified. BTFM and WLIS will be defending the claims."
Westpac is also facing a class action from Maurice Blackburn over allegations it breached responsible lending obligations.
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The case alleges BT short-changed its members in the BT Super for Life cash-only option by investing through Westpac Life and allowing it to earn substantial fees while providing no service.
BT allegedly chose to use Westpac Life as an intermediary rather that investing member funds directly.
Slater and Gordon special counsel Nathan Rapoport said Westpac Life was given complete discretion about the interest rates that it would pass on to members, and at times kept almost half of the returns on members' money for itself.
"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," Rapoport said.
"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% 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."
The case is funded by Therium Capital Management, a leading litigation funder based in the UK and Australia.