Research from CSIRO says minimum account-based pension withdrawal rates are acting as a conservative default that sees retirees exceeding needs to self-insure their financial longevity.
CSIRO behavioural economics and superannuation decision-making research project leader Andrew Reeson said the latest research mainly comes from anonymous data provided by the Australian Taxation Office (ATO) and focuses around how people are behaving in the drawdown phase of super.
"What we're seeing, which has surprised us initially, is that withdrawals tend to be quite conservative. Most people but by no means all are actually sticking at or staying close to the minimum withdrawal rates, which are quite low," Reeson said.
"It does suggest for many people the minimum withdrawal rate has acted as a default, and given how low those minimum rates are, it does mean for many people it is likely to leave substantial amounts of superannuation unspent."
Reeson said it is only in recent years that significant numbers of people have been fortunate enough to retire with decent superannuation balances. The soon-to-be released research suggests people with smaller balances are actually likely to draw down at a slightly higher rate.
"We've broken down the data in to larger and smaller balances and you see pretty similar patterns," Reeson said.
"So what we're seeing is very conservative drawing down behavior in most cases and of course there is plenty of variation but the median, depending on how you cut the data, is that or just above the minimum withdrawal rate."
As part of work with the CSIRO-Monash Superannuation Research Cluster, Reeson said the data is also showing that as super funds have presented strong returns in recent years "it is not uncommon for super balances to grow even in the drawdown phase where the investment returns have cleared the withdrawals."
Reeson admitted the data is relatively skewed towards the early years of retirement.
The Association of Superannuation Funds of Australia (ASFA) said while median account balance averages for those with superannuation may not decline much with age after retirement, "many people, particularly with APRA fund accounts, drop out of the average figures as they close their account."
"Less than 10% of Australians aged 85 and over still have superannuation, so much of that age group have drawn down their superannuation to zero. ASFA account balance figures for each age group include those with zero balances or no superannuation, and show that the assets, on average, steadily decline with age," an ASFA statement said.
"It is important to note that the amount of money that most retirees are currently holding at retirement or death is far below the amount required for a comfortable level of expenditure."