Many retirees are missing out on additional income because their Australian equity portfolios do not take advantage of the taxation system, according to Plato Investment Management.

Plato portfolio manager Peter Gardner said, with interest rates at historic lows, many retirees are in a position where they could garner more income from franking credits than cash investments.

"Many pension phase and tax-exempt investors we speak to remain surprised that one dollar of pre-tax income from fully franked dividends is actually worth $1.43 to them after receiving the franking refund," Gardner said.

"This is despite the significant attention franking received at the last Federal election."

Gardner said the events of this year have served to prove the importance of franking credits for retirees.

"As an investment firm specialising in retirement income, we campaigned against moves to abolish franking credits at the last federal election, now we see why they're so important as retirees continue to be hit by rate cuts which are destroying their income from other asset classes," he said.

"Fortunately, dividend income remains relatively strong and franking credits remain in place."

Gardner said in the current market the mining sector is leading the pack when it comes to franking yield returns.

"Fortescue Metals is currently paying a gross income of 14.5%, including a franking yield of 4.3%. We expect this to be sustainable in the foreseeable future and believe there remains a positive outlook for the price of iron ore," Gardner said.

"Rio Tinto and BHP are other notable dividend payers at the moment which offer retirees the additional benefit of fully franked dividends. "

Gardner added that a focus on investing in companies that offer franked dividends in a "no-brainer" for retirees.

"Unfortunately, we find many aren't doing this, the same goes for tax effective buybacks which can also add considerable after-tax alpha when on offer," he said.

"Retirees should assess the management of their equity portfolios to ensure they have a bias towards franked dividends and take advantage of other tax-effective opportunities such a buybacks."