The country's third-largest lender also said it would merge its unit BT's personal and corporate pension funds with Mercer Super Trust, which is managed by Marsh & McLennan-backed Mercer Australia.
Westpac expects the deals to result in an after-tax gain of A$225 million ($159.91 million) over the remainder of this financial year and the next.
The bank, however, did not immediately respond to a Reuters' request to reveal the deal terms of the sale of its business.
The merger of BT's funds with Mercer Super Trust will create a pension fund worth A$65 billion, BT and Mercer said in a joint statement.
BT employees who support these funds will also be offered employment by Mercer, as part of the agreement, they said.
"This is a further step in the simplification of Westpac and supports the Group's focus on banking in Australia and New Zealand", said Westpac Specialist Businesses Chief Executive Jason Yetton.
Major Australian banks have, since a 2018 regulatory inquiry into the sector, exited non-core parts of their business, with Westpac in 2021 having divested its life insurance and auto loans units.
Rival Commonwealth Bank of Australia also sold its general insurance unit the same year.
Westpac shares rose about 1% to A$24.10 in early trade.
($1 = 1.4071 Australian dollars)
(Reporting by Harshita Swaminathan, additional reporting by Upasana Singh; editing by Uttaresh.V)