Westpac ups the ante in the SMSF deposit war

Co-founder of the Switzer Super Report
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Westpac has thrown out a very aggressive offer in the battle for SMSF bank account balances, with an incentive of up to $1,500 if you open their ‘DIY Super Solution’ bank account and hold at least $25,000 in the account for six months. It will be interesting to see which of the other banks respond, and how.

We reviewed the SMSF ‘tailored’ bank accounts back on 26 March, and have updated our analysis below.

The Westpac ‘DIY Super Solution’ comes out pretty favourably in terms of transactional ability, features and interest rates – so this is an offer certainly worth considering, particularly with an understanding of the inevitable fine print.

The offer

The offer is in two parts. The first part is a $500 ‘bonus’ interest payment if you transfer at least $25,000 into a new or existing ‘DIY Super Solution’ account and maintain the increased balance for at least six months. For new customers, this means opening an account before 30 September, depositing at least $25,000 in a single transaction, and holding that balance for at least six months.

The second part (which for some trustees will be of limited value) is a rebate of up to $1,000 on brokerage with Westpac Broking. This applies to share trades within six months of your broking account being opened. Opening a share broking account is an option you can select when opening the DIY Super Solution cash accounts.

The account

The Westpac DIY Super Solution comprises two linked bank accounts – a ‘Working’ account and a ‘Super Savings account’. The latter is currently paying 4% on every dollar – 50 basis points above the Reserve Bank of Australia’s (RBA) cash rate. So, if you do exactly as per the offer and open an account with $25,000 and leave it there for six months, the effective interest rate (with the $500 bonus interest) is 8% per annum – a bonus rate of 4% for the period! If you transfer $50,000, the effective rate for the period drops to 6% per annum – if you transfer $100,000, it is down to 5% per annum – nothing to be sneezed at!

Similar to the other tailored offerings from banks to SMSFs, the Westpac DIY Super Solution has no monthly account fee. You can, as an option, get a cheque book (which some Trustees still prefer), although you will pay $1 per cheque. Direct debits are also charged at $0.25 per debit.

With its two-account structure, it doesn’t pay a high rate of interest on the working account – although it is better than its competitors. To maximize the return, trustees need to be vigilant and transfer monies as they are received from the ‘working account’ to the ‘super savings’ account.

Your options

Our updated analysis of the major ‘tailored’ SMSF bank accounts is detailed below. One important factor not covered is of course “customer service” – much harder to assess on a quantitative basis – but a key factor for many trustees. We would like to know of your experiences – good and bad!

Rates as at 22 June, 2012.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should, before acting, consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek professional advice.

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