That’s the view put forward by the Financial Services Council and Tailored Superannuation Solutions (TSS) in a new report.

The two organisations found that “millions” of Australians using MySuper could be missing out on about 35 per cent of their retirement balances due to a “lack of genuine competitive forces targeting better retirement outcomes”.

They explained: “Significantly higher levels of retirement savings can be achieved through reconsidering the traditional design of MySuper products, promoting member engagement with their superannuation and using new technology with member data to create innovative product design.

“Analysis by TSS shows that adopting innovative ‘smart default’ products that take into account a member’s individual circumstances, such as their projected retirement balance and time to retirement, could improve MySuper inflation-adjusted returns from an industry average of circa 3.5 per cent real per annum to 4.5 per cent per annum.

"That amounts to around 35 per cent improvement in retirement balances.”

Further, a “smarter” approach could contribute $5 billion to balances each year over 15 million MySuper accounts, filling the “impending retirement funding gap over time”, given that the 2015/16 Age Pension cost was $44 billion.

Nevertheless, the current industrial awards system and absence of competitive pressure in the default market has meant super fund trustees have been “allowed” to “avoid considering which changes may be necessary to adapt to technological shifts that improve retirement outcomes for members”.

“This has been reinforced by an unwillingness by trustees to invest in new technologies, due to a focus on lowest cost rather than improved retirement balances.”

The report argued that MySuper members rely on trustees to operate in their best interests until the point they choose to engage.

However, when that moment occurs, “those MySuper members who have simply been dumped in a one-size-fits-all investment option by their trustee can hardly be expected… to be enthralled by any offering”.

“The needs of MySuper members have been largely ignored, leading to a stark dichotomy”, the report added, claiming that member attraction and retention would be a key to success.

According to the Financial Services Council CEO Sally Loane, Australia’s 25-year-old system “must be made fit for purpose” by targeting the “retirement objective”.

She said new technology has made it easier to deliver products that are better tailored to individual needs, “but the current industrial default system means trustees have not had much incentive to innovate, until now”.

She continued: “The status quo is not providing solutions to the industry’s issues or contributing optimally to the retirement savings funding gap.”

TSS CEO Douglass Bucknell agreed, adding: “In this digital age, it’s no longer appropriate for MySuper trustees to just dump two 40-year-olds, one projected to retire on the age pension, the other with $1.6 million, in the same investment option for the next 25 years.”

“Trustees tell their choice members to consider their investment horizon and projected retirement balance when selecting an investment option – but don’t follow their own advice when it comes to selecting an investment option on behalf of MySuper members.”