“This would save the budget about $1.1 billion a year and stop many high-income earners benefiting from larger tax breaks, per dollar contributed to their super, than low- and middle-income earners,” the report read.

Additionally, the institute recommended lowering the cap on pre-tax super contributions from $30,000 a year to $20,000 a year and said this would save about $1.6 billion a year, mostly by reducing voluntary contributions made by older, wealthier Australians to minimise their income tax bills.

It also suggested abolishing carry-forward provisions and government co-contributions, which it said were intended to encourage catch-up contributions but in fact facilitate tax minimisation for high-income couples and would save about $1.1 billion a year.

Furthermore, it recommended taxing all superannuation earnings in retirement at 15 per cent – the same rate that applies to super earnings before retirement.

“Retirees would then pay some tax on their superannuation savings – the same as people working today – but still much less than younger workers pay on their wages,” it read.

“This reform would save more than $5.3 billion a year. These changes, together with lowering the cap on limiting super tax breaks to $2 million, could save the federal budget more than $10 billion a year, and much more in future, without reducing the adequacy of retirement incomes.”

It called on the government to simplify super for retirees and give them the confidence to spend their savings by introducing three key reforms.

“First, retirees should be encouraged to use some of their super to buy an annuity from the government. Retirees should be encouraged to allocate 80 per cent of any super balance above $250,000 to purchase an annuity, with the rest to be drawn via an account-based pension that provides flexible access to capital,” it read.

“This would boost retirees’ incomes by up to 25 per cent compared to solely drawing on an account-based pension at legislated minimum rates. And it would ensure that the bulk of retirees’ incomes, irrespective of their super balances, would be guaranteed to last the rest of their lives.”

The second key reform is the establishment of a free service that “sums the parts” of the retirement income system for retirees and people approaching retirement.

It said this guidance service should aim to advise at least one-third of new retirees and would cost about $360 million over its first four years and $50 million a year thereafter, which should be funded by a levy on super fund balances.

The final key reform was in implementing the Productivity Commission’s “best-in-show” recommendation, which required the government to ensure funds are also selected on their ability to provide efficient account-based pensions and high-quality guidance and advice to retirees.

“Retirees should be steered towards these funds – as would new entrants to the workforce. Further, the performance test and comprehensive assessments of fund performance by APRA should be extended to account-based pensions,” it read.

“These reforms could boost the incomes of future retirees who continue to opt for an account-based pension by up to $70,000 over their retirement.”

The report suggested that more home equity should be included in the age pension assets test.

“Only the first $252,000 of home equity is counted in the age pension assets test. Many age pension payments are made to households that have substantial property assets: almost 40 per cent of the government’s spending on the age pension goes to people with more than $750,000 in assets.”

“The test should be changed so that all the equity is counted above a generous threshold – for example $750,000. This would be fairer and could save the federal budget about $4 billion a year.”

The report said this change would reduce the unfairness of the current system that treats the assets of homeowners and renters differently.

“It would encourage more retired homeowners to boost their retirement incomes by drawing on their home equity in retirement and it would encourage a few more senior Australians to downsize to more appropriate housing, although financial considerations are not the biggest driver of retirees’ decisions to downsize their home.”

“No homeowning retirees would be forced to move. Affected retirees could top up their (lower) pension payments by using the Home Equity Access Scheme, which allows retirees to draw home equity up to a maximum of 150 per cent of the age pension. Payments are not taxable and don’t count towards the age pension income test.

“The outstanding debt accrues with annual interest of 3.95 per cent, which the government recovers when the property securing the loan is sold, or from the borrower’s estate.”