Mr Conway said many retirees take a partial or total lump sum with a high percentage, using the lump sum to pay off a mortgage or purchase other non-income supporting assets.

“A smaller percentage of retirees are investing in a pension product such as an annuity or life pension, or an income earning product such as a bank account,” he said.

While the IPA supports choice in superannuation, Mr Conway said the current use of funds “does little to diminish the future pension burden faced by a shrinking workforce and aging population”.

“Annuities may be the missing link in people’s thinking between drawing down from their existing superannuation and finding sustainable income streams that support their retirement,” he said.

Mr Conway said the IPA supports the Financial System Inquiry’s (FSI's) recommendation that annuities be offered as the default option for accessing superannuation after retirement.

“This would mean that people need to opt out in order to receive a lump sum payment, which is the more common method of withdrawing super currently,” said Mr Conway.

“The FSI report stated that greater use of annuities may help retirees’ super savings go further, and reduce the need for them to draw on the age pension.”